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No. 330

January 2003

Vol LXXXIII

ISSN 0019-5170

Contents


 

 The Impact of Economic Reform on the Behaviour of Stock Prices: Empirical Evidence From The Nigerian Stock Market

HASSAN E. OAIKHENAN
 

This paper incorporates firms' tax evasion with the model of Ricketts [1984] and investigates the effect of tax evasion on domestic output and tax collects through two channels: individual consumption expansion due to higher disposable income and firms investment expenditure increment as a result of lower input costs. The results indicate that a rise in tax evasion is not necessarily associated with a higher level of domestic output, and may actually lead to higher total tax collection.

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  Climate Change: An Indian Perspective

KAKALI MUKHOPADHYAY
 

In this paper we examine both long-term and short-term dynamic relationships among money supply and its components for Bangladesh economy within an Engle-Granger error-correction framework. Using 24 years of annual data on money and its components, our results suggest that MI and M2 money supply have very predictable long-run relation- ships with its components. Moreover, MI money supply has short-run relationship with its components but no short-term relationships exist among M2 and its components indicating the absence of a developed money market operation in Bangladesh. Finally, the choice between monetary targeting and inflation targeting is also discussed.

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   Theoretical and Empirical Issues on Manufacturing Capacity Utilisation: The Case of Manufacturing Industries in Ghana

K. ACHEAMPONG AND J. V. MENSAH
 

This study analyses whether or not the fast growth in the size of the government sector in Botswana was a stimulus to economic growth; in particular, whether it continued to be a stimulus, or it later became an impediment to Botswana's economic growth. The study employs two methods to gauge the impact of government size on economic growth. First, it utilizes the conventional approach, which is a variant of the famous Slow growth model. Secondly, the study employs a novel approach, which allows for intersectoral productivity differential between the government and non-government sectors, The new approach also explicitly models the externality effect of government size, Furthermore, in both methods of a structural break is included by means of an interactive dummy variable to determine whether or not the role of the government sector remains the same or changes over time. These methods are estimated with data for Botswana for the period 1976-98.
The results show that up to 1995, the government sector, as measured by government development expenditure, has a positive externality on the non-government sector. However, after 1995, the impact of the government sector is negative. These results support the view held by some economists that the government sector is a necessary catalyst in fostering economic growth in the initial stages of the growth and development of a country. Eventually, 'however, the government sector becomes an impediment to economic growth because big government starts to crowd out the private sector.

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  A Taxation Model on Exhaustible Resources

CHUNG-CHIANG CHEN
 

The study investigated the empirical validity of the monetary model of exchange rate determination for Indian rupee, Pound Sterling and Yen in terms of US dollar. The necessary monthly information were collected from the International Financial Statistics for the year 1975 : 10 to 1998: 05. The model doubts the role of monetary variable viz., money supply, interest rate and Index of Industrial Production on the nominal exchange rate of the selected currencies in the short run. The model proves that the exchange rates are not determined by purely monetary factors. Besides economic liberalization did not alter the results of variability of exchange rate determination under monetary model framework of the selected countries' currencies. Hence the study provides scope for developing a comprehensive structural model by incorporating other fundamental variables like trade balance, reserve position, government's fiscal deficit as percentage to GDP, public debt position etc., to judge the value and direction of exchange rate movements.

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  The Relation Between Foreign Direct Investment and Growth: Causality and Mechanisms

MOUSUMI Dun ARA Y, AMIT A V A KRISHNA Dun AND KAJAL MUKHOPADHYAY
 

We use an option-based valuation to examine mirror transactions of loan portfolio swaps between a parent bank and its structured derivative product company (DPC). The transactions are governed by capital regulation and deposit insurance. We model the risk premium compensation on the parent bank's loan portfolio swaps that reflect the magnitude of potential default risk of its structured DPC. We show that under strategic complements, the parent's optimal non-swap-performing and swap-performing loan rates are a decreasing function of the defaulting of the DPC's collateral and capital-to-deposits ratio, and an increasing function of the DPC's customer bank's loan rate and deposit insurance premium.

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  Infonnal Sector, Micro Credit Delivery and Entrepreneurial Development in Nigeria

SOILE, I. OLADIMEJI AND R. A. AJISAFE

Government debts are directly relevant to government revenues and expenditures. The relationship between government revenues and expenditures has long been an interesting topic for research. Some studies supported tax-spend, some supported spend-tax, some believed fiscal synchronization, and others regard that is irrelevant. This study uses Taiwan quarterly data from 1981 to 1999 to examine the debate on the temporal relationship between government revenues and expenditures. The government revenues grow at the growth of GDP, while the size of expenditures is result of a requirement to conform to a budget constraint. The new government in Taiwan faces the challenges in balancing the deficit and realizing campaign promises. Government cut down the expenditure in order to reach a balanced budget.

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Employment, Productivity and Efficiency Trends in Indian Industries

S. P. SINGH
 

Despite almost two decades of implementing the structural adjustment program (SAP) of the World Bank and International Monetary Fund (IMF), Ghana's economy is characterized by high inflation, heavy debt burden, mass unemployment and vulnerability to external shocks. These problems compelled the government to announce its intention to join the HIPC initiative in March 200 I. The decision has engendered a lot of 4ebates and speculations. The main argument used by supporters of the decision is that the current economic problems of the country provide little room for running the economy without adopting the initiative. On the other hand, the opponents are skeptical about the potency of the initiative in solving the country's economic woes. This paper contributes to the debate by examining the prospects and concerns facing Ghana for joining the HIPC initiative. It starts with a brief discussion of antecedent factors, the eligibility characteristics, and the conditions associated with joining the initiative. Further discussion concentrate on the possible benefits and losses and prospects for the economy. It finally argues that since the initiative only provides a short-term relief, the nation needs real economic reforms that address its fundamental problems.

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Expenditure Pattern and Revenue Generation in Orissa State: Misplaced Priorities

PRATAP RANJAN JENA
 

The banking industry in Nigeria is currently experiencing a crisis of confidence that has resulted in some banks being liquidated while some others have been taken over by the Central Bank of Nigeria (CBN). 'The situation is of serious concern to the entire economic system, particularly considering the significance of the banking industry to a nation's economic growth. How can this trend be stopped? This is the focus of this paper.
To accomplish this task, we gathered data and information from some randomly selected banks through the instrument of questionnaire coupled with personal discussion with staff of the Research Department of Central Bank of Nigeria (CBN), Nigeria Deposit Insurance Corporation (NDIC), and the Nigerian Stock Exchange (NSE). Our analysis of these date gave us a clear insight of the factors responsible for the current wave of distress in the banking sector. Based on our findings, we have made suggestions that may help to restore confidence in the banning sector.
 

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