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No. 338

January 2005





     On Money Uncertainty and Inflation for Taiwan

Yen-Sen,Ni And Man-Hwa, Wu

 The paper uses monthly data of money and consumer price index from January 1988 to December 2001 for Taiwan.We use  GARCH  models and component GARCH models to retrieve money volatilities and then test the effect of money uncertainty to  inflation. With concerning symmetric and asymmetric models and with concerning five different Jag-chosen criteria, our empirical results show that money volatilities have significant, and positive effects on inflation. It reveals that stable monetary policies will be better for the economy in Taiwan, since money uncertainty will cause the inflation and the fluctuation of economy in Taiwan.

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     Trade off between inflation and Unemployment Cointegration Approach


There were arguments for and against the trade-off inflation and unemployment. There is fundamental disagreement between the Keynesian, monetarist and new classical economists as to what were the main causes of inflation and unemployment. Very little empirical research on this topic was being carried out in India. But these studies failed to analyse either the short run dynamics or the long run equilibrium in inflation and  unemployment based on cointegration. approach. The present work is an attempt to empirically test the relationship between inflation and  unemployment using time series data on the Indian economy applying the cointegration approach. The results of the study indicated the first order autoregressive form of unemployment suggested by Sargent did perform well for the Indian data. Further, there was a mild support for the new classical proposition that only the unanticipated rate of growth of money supply lagged by two  years had real effect on unemployment. However the models on inflation neither supported the monetarists nor the Keynesians schools of thought. The level of unemployment was found to move towards short run equilibrium and the rate of inflation was found to be endogenous being explained by its own shocks.

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    Government Expenditures on Social Services : How Far Has the Poor Benetited in Swaziland ?


The conventional wisdom in both the public finance and development economics literature seems to suggest that one of the major roles of government in any society is to enhance social welfare through its fiscal policy actions. An important way through which the government could achieve this would be by spending on things of value to people that they will not otherwise be able to provide for themselves. In this regard, the conjecture is that public spending should be directed, not just at promoting efficiency by correcting for market failure in the economy, but also promoting equity and reducing poverty through the distribution of the gains from economic growth. In this paper we have shown that despite substantial increases in government expenditures on health, education and other social services in Swaziland, poverty continues to be endemic and the poor continue to be under-served in terms of access to basic education, primary health care and better living conditions. The level of poverty remains quite high; 70 per cent of the population continue to live in the rural areas; a small proportion of the population continue to hold a large portion of income; and land remains largely in the hands of the minority. For the objective of poverty reduction and equity to become achievable in Swaziland, fiscal policy actions of the governments will need to be more target at the currently underserved and the poor in the society, particularly the rural dwellers. In this way, the access of the poor people to health, education and other infrastructure such as housing, safe water and other safety benefits could be guaranteed and sustained.

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    Optimizing Strategy within Productive Location among Three Countries under Exchange Rate Uncertainty : A Real Options Approach


This study considers the effects of two real exchange rates on strategies that govern the locations of production of by firms that are entering foreign markets in three countries. This investigation extends the Cobb-Douglas batch process production model of Lin and Wu (Indian Journal of Economics, 2004), which considers two locations of production in two countries, respectively to establish a decision valuation model for selecting the three optimal locations for one in each country. A general form of the first order of degree homothetic production functions is also considered in relation to the rule for decision-making in the proposed model. This paper applies the real options approach (ROA) to evaluate the behavior of the transferable location in the three countries. Furthermore, a Continuous-Time model Optimization Problem is solved to obtain a closed form solution of the threshold value, perform a sensitivity analysis, and determine some characteristic strategies of operating method for the CES batch process model for three countries, omit summarized into useful insights for global managers.

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     Overseas Mergers and Acquisitions by Indian Enterprises : Patterns and Motivations


This paper examines the patterns and motivations behind the overseas M & As by Indian enterprises. It is found that a large majority of overseas M & As originated within services sector led by software industry and in overwhelming cases were directed towards developedcountries of the world   economy. The main motivations of Indian firm's overseas acquisitions have been to access international market,firm-specific intangibles like technology and human skills, benefits from operational synergies, overcome constraints from limited home market growth, and survive in an increasingly competitive business environment. Further it has been found that overseas acquirers in the case of manufacturing sector tends to be large sized and research intensive,while they are older, large sized and export-oriented in the case of software sector.

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     An Analysis of the Growth of Manufacturing Sector in West Bengal (1977-1988)


The paper analyses growth of the manufacturing sector in West Bengal in a more disaggregative way for the period 1977-1998 as this sector is dynamic in any economy. The compound growth mtes for the two-digit industries have been calculated for the period 1977-1998 and also for the period 1977-1992 and 1992-1998. The results show that the industrial situation in the state at the time 1977-1992 was dismal but after this period the situation is improving to some extent. Growth rate of most of the industries accelerated during reform period. To know the concentration of industries Hirshman Herfindal Index has also been calculated in the paper.
To know the closeness between employment and output and also the relation between employment and capital, employment elasticity with respect to output and employment elasticity with respect to capital have been calculated. The results of employment elasticity with respect to output show that manufacture of jute. beverages, furniture, wool. silk has positive employment elasticities indicating labour intensiveness of these industries. The employment elasticity with respect of fixed capital shows negative sign for most of those industries which show positive sign for employment elasticity with respect to output implying substitutability between capital and labour. However manufacture of food, cotton textile. wool. silk. leather shows complementarity between these two factors. Concluding remarks are presented in the paper.

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     Migration as A Source of Human Resource Development : An Analysis of Indian Empirical Experience


The study has estimated the value of migrants' contribution to growth of a state. This has been a neglected aspect, though the role of migration in economic growth has attracted attention of economists, analysts and policy makers.
Migration accelerates growth by shifting manpower from labour surplus region/nations, sectors and occupations to those experiencing shortages, moving the economy towards equilibrium in human resource allocation and utilization. It shifts the demand curve for labour upwards to the right, raising investment, employment, wages and about. This study develops an input-output model of inter-state migration to detennine (i) Markov-Chain probabilities of spatial pattern of migration, and (ii) Value of migrants to the economy for which an input-output model has been developed.
The study reveals that (a) distance determines the choice of state/region of migrants destination. where job opportunities are available at comparable wages; (b) migrants prefer industrially/agriculturally developed states/regions as the destination of migration; (c) agricultural labour dominates the occupational structure of migrants, reflecting the dominance of rural to rural rather than rural to urban migration. This contradicts the Todaro hypothesis of the dominance of rural to urban migration; and (d) migration. besides generating employment, raises productivity, and hence, the earnings of the migrants. thereby improving not only economic conditions of migrants but also promoting growth of the economy.

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     Exports, Importsand Output in the US : What Causes What?


Cointegration and vector autoregression are used to examine relationships among exports, imports, and output in the United States from 1971 to 2001. These three variables are co integrated. There is bi-directional Granger causality for output-imports and exports-imports, but only unidirectional causality from output to exports. Impulse response and variance decomposition analyses tell similar stories. Exports do not appear to have led to economic growth in the US over this period.

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