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No. 336

July 2004

Vol LXXXV

ISSN 0019-5170

Contents

Notes and Memoranda


 
 

 Effects of the Legislative Sessions on the Stock Market: Evidence from Taiwan

CHIN- TSAl LIN AND YI-HSIEN WANG
 

In this paper we examine the relationship between the politics and the financial market in Taiwan. We deal with the effects of the legislative sessions between the pre- and post-power change on the stock return and volatility by the AR (3)-EGARCH (1,1) model from February 24, 1984 to January 14, 2003. The results provide empirical evidence that neither returns nor volatility of Taiwanese stock market are significant at the 5% level when the legislative assembly is in session. But Taiwan stock market following a change of power are significantly negative at the 5% level, volatility of the Taiwanes stock market following the change of power to significantly exceed that previously at the 5% level. Moreover, the effect of legislative sessions posterior to the cl1ange of power is significantly more than the ones prior to the change of power on the stock market return, but this effect pre- and post- the change of power does not significant on the stock market volatility. This result can be attributed to the development of the political democratization of the Taiwan legislative assembly, which remains immature.

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 Growth Effects of Capital Account Liberalization: Evidence From Vector Error Correction Model of Nigeria

AJILORE, OLUBANJO T AlWO
 

Theoretical and empirical literature continued to present conflicting thesis on the desirability and consequences of capital account liberalization, especially for developing countries. The study focused at verifying the growth effect of this phenomenon for the Nigerian deregulated economy. The paper uses the co-integration and the associated error-correction procedure on quarterly data on Nigeria for the period 1986 (I) and 2000 (4) to estimate a standard growth equation for the Nigerian economy. The results from the Augmented Dickey-Fuller (ADF) tests confirmed that all variables are of random walk, while the Johansen co-integration likelihood ratio test establishes the presence of two co integrating relationship among the four-variables model. Consequence upon the foregoing, an error-correction model was developed which was shown to be well specified relative to its own information set and capable of parsimoniously representing the data set. The findings from this study confirmed that the surge in inflow of foreign private capital that occasioned the opening of the country capital accounts in the late eighties have had positive effects on growth performance in Nigeria. This result runs contrary to common positions in literature that capital account liberalization is inimical to economic performance for less developed countries.

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 Importance of Knowledge Management for
Call Centres

ANJILA SAXENA
 

Knowledge Management (KM) is the concept in which an enterprise gathers, organize, analyzes and shares its knowledge in terms of resources, documents and people skills. It helps an organization in acquiring and storing knowledge, in planning and decision making. Call Centers provide many business advantages, including improved efficiency, increased hours of operation, reduced costs and greater flexibility. Perhaps, the greatest challenge of running a call centre, however, is ensuring that customers are provided with the right information in a timely fashion. Knowledge Management (KM) has a number of practical tools and strategies for meeting this challenge, and call centre managers have much to gain by exploring KM principles.

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 A Computer Program for investment Appraisal in Power Sector

URMILA VERMA, N. P. SINGH AND R. K. TUTEJA
 

Visual Basic macro based input module has been developed for getting cash flow analysis in context of investment appraisal. The data entry is done through the spreadsheet in different cells or by using the function key for entering a formula. The module developed is basically based on creating windows foe data input user's friendly prompts. Each and every window is provided with a default value and mainly consists of input parameters of a project and their values considered for the project period. The module has linkages with several sub-modules for preparing the cash flow analysis of a project investment plan based on as many input parameters as one can have and also the life cycle of the project.

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 The Choice of Green Policies in Supply Chain Contracts

CHUNG-CHIANG CHEN
 

The awareness of public environmentalism has forced firms to consider manufacturing greener parts, materials, and services to improve environmental performance. Most multinational firms acknowledge the necessity of the social responsibility to perform green purchasing and extend their activities beyond the traditional obligations of economic profit seeking. Therefore, they urge the suppliers to provide green parts or products in the supply chain contracts. In this paper, we examine he supplier's responsive behaviors to the external pressure demanded by the buyers for greener production and examine the effects of market scale, environmentalism and technology progress on the optimal greenness level of the supplied products. The results show higher environmentalism and better technology provide a vital power to pressure firms in adopting higher greenness level in product design, but the market scale may' affect the decisions of green policies in a different way.

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  New Institutions and Economic Development: The Significance of Governance and Social Capital for Economic Growth

T. LAKSHMANASAMY
 

This paper presents a brief review of both the basic and the expanded New Institutional Economics and their relevance for economic development. The early new institutional economics, which emphasizes the role of formal institutions like property rights in reducing transaction costs has been termed as 'old' new institutional economics. The more recently identified informal institutions like governance and social capital that can substitute for the absence of formal institutions not only in reducing transaction costs but also in contributing for economic growth has been referred to as 'neo'-new institutional economics. Though the early classical institutionalists demonstrated how institutional environment affects economic development, the neoclassical growth literature has ignored institutions as a factor in economic growth. The more recent endogenous growth theory has also failed to recognize the role of institutions in economic growth. The old new institutional economics has concentrated more on the political, economic and social institutions in the form of property rights, civil rights and legal enforcement. The neo-new institutional economics builds on the importance of norms, networks, trust, and civic engagement in strengthening transaction agreements and informal contracts.
This review shows that the lesson of the development experience of the last few decades has been that both the market and the state are complements to each other in economic development. The market needs the state to provide the institutional environments for effective functioning and the state needs the market for efficient resource allocation. The state has to provide the investment climate and the regulatory institutions. For effective economic development markets are central, and in developing efficient markets, institutions play an important role in how markets are central, and in developing efficient markets, institutions play an important role in how markets affect standards of living and help protect their rights. In the case both market and government failures, the community arrangements to facilitate transactions become operative. Development can not be sensibly understood simply in terms of growth of aggregates such as income per capita; Development is about fundamental change in economic and social structures. The institutions provide inclusive and integrated markets and ensure stable growth. and strong institutions provide opportunities for people and empower them. For sustainable development in a dynamic world institutions need to be improved at many levels. Almost all societies have invested considerably in their social capital. The more recent growth literature has attempted to incorporate the social capital in basic growth equations. The available few empirical evidences indicate that social capital, measured in terms of organizational memberships, is also a form of investment and in fact social capital contributes positively to economic growth.

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New Perspectives on the Role of Banks: Not Only Financial Intermediaries but Really Solving Problems for Clients

MIAO-SHENG CHEN AND CHUAN-HSING HUANG
 

Conventional Western banking theory defines the role of banks as financial intermediaries, emphasizing the function of banks to bridge the demand and supply of capital. As a service industry, banks should undoubtedly strengthen the quality of service. However, in practice, banks often interpret quality in a superficial sense, such as being friendly to clients, simplifying procedures and expanding branches, without a commitment to really solving problems for clients. This paper attempts to give new perspectives on the role of banks with solving problems for clients as a starting point. By complementing the current cope of banking services, this paper seeks to provide ideas to further deepen the bondage banks may develop with their clients. Given the minority status of agriculture in Taiwan, this paper explains how financial institutions may solve the problems of farmers by actively participating in different stages in the production and distribution process. This is used as an example to shed light on the new perspectives of banking functions, which are then applied to commercial banks to enhance their services to clients.

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Investment Opportunities in Major and Medium Irrigation in India: An Analysis considering Unutilized Potential, Efficiency and Cost

INDRANIL DE
 

Expansion in the Major and Medium (M. & M.) irrigation has become necessary due to overexploitation of groundwater through minor irrigation. The major argument behind expansion of M.& M. irrigation is that it suffers from low utilization of potential created, high cost, low recovery of working expenses and environmental damage. The paper argues that the above-mentioned problems of M. & M. irrigation are not uniform in all the states of India. There are states with huge amount of potential unutilized, and conditions regarding utilization of potential create
d and cost favorable to take an expansionary policy in M. & M. irrigation. The paper has also suggested policies for M. & M. irrigation suitable for the states under consideration. The paper argues that participatory management in M. & M. irrigation can take account the problem of low utilization of potential created and low cost recovery. Environmental issues have not been discussed here.

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  Value Added Tax (VAT) in Retrospect and Prospects: The Indian Experience

INDU KUMARl TIWARI
 

Taxation has continued to be one of the most important sources of revenue for both the Central and the State Governments in India. Further, both the layers of Government have depended more on indirect taxation, especially in view of the low per capita income of the masses. The cost consideration also prohibit the collection of direct taxes from majority of the people. Under such a' situation increase in revenue is more in case of indirect taxes in India. In this context, it may be pointed out that direct taxes constituted 2.31 percent of the G. D. P. in 1951-52, while indirect taxes formed 4.68 percent of the G. D. P. Indirect taxes have continued to predominate in India's tax structure, the percentage share of indirect taxes in 2000-01 stood at 11.47 percent as against 3.46 percent in the case of direct taxes.

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University of Allahabad