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No. 321



ISSN 0019-5170



On Forecasting Economic Time Series Data: A Comparative Study


Since the appearance of the book by Box and Jenkins in 1970, the use of auto regressive integrated moving average model has become widespread in analyzing and forecasting economic time series data. Sims (1980) proposed a vector auto regressive model (VAR) model approach as an alternative to the conventional strategy for constructing macro- economic model. Trevor and Thorp (1988) emphasized that estimating a V AR model using non-stationary data may result in unstable econometric relationships and suggested using Bayesian V AR model to accommodate non- stationarity. In this paper we have compared the forecasting performance of these models using Australian macro- economic time series data.

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 The Sources of Sectoral Growth in Malaysia: An I-O Analysis between 1978-1987


This study empirically analyses the sources of sectoral growth in Malaysia, 1978-1987. Growth rates are examined in terms of how changes in a sector's output can be apportioned between changes in (I) domestic final demand (2) export demand, (3) intermediate demand and (4) import substitution. Result indicates that the manufacturing sector has played a catalyst role to Malaysian economic growth that means Malaysia has experienced very high real growth through the rapid expansion of the industrial sector. The study also reveals that export-oriented industrialization strategy has provided a strong stimulus to growth. This could be attributed to dramatic change in policy emphasis during 1970s from the import substitution strategy to a more outward looking export-oriented approach and also resulted in a substantial structural change of the Malaysian economy during the study period. The study recommended that the strategy to encourage growth should focus on marketing and consumer-oriented production in order to establish export "niches" where possible. This may be achieved through greater emphasis on an open-economy, marketing strategy and export-oriented industrialisation strategy while maintaining a balance between promoting export and reducing imports.

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   Military Expenditure and Economic Growth : Empirical Evidence from Ghana


The present study has empirically tested the growth-led-military expenditure and military expenditure-led-growth hypotheses for Ghana by developing and estimating static and dynamic simultaneous equation models. The growth-led-military expenditure hypothesis seems to describe Ghanaian data adequately. The Granger causality and Co-integration tests, however, support the dynamic versions of growth- led-military expenditure as well as military expenditure-led-growth hypotheses. The speeds of adjustment of labour and product markets are rather too sluggish. The innovations of output growth are better predictors of military expenditure's growth. 1ne structural shocks from the labour market are transmitted to the product market and vice- versa, and the effects of these shocks are permanent.

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Foreign Direct1hvestment in ASEAN Economies


ASEAN region has become one of the attractive investment locations in the developing world and attracted sizeable FDI during 1987-94. There was spurt in growth of global FDI flows during 1985-95. The FDI inflows in ASEAN have increased from an annual average of $8 billion in 1986-91 to 25.5 billion in 1997. They adopted relatively free market, free trade, open capital account and liberalized policies to attract FDI. The success of ASEAN countries in attracting FDI may be attributed to a combination of factors that include political, social, economic stability, buoyant economies with capacity, growing domestic markets, favourable factor endowments, particularly natural resources and labour supply. The incentives given by ASEAN countries ranged from tax holidays, accelerated depreciation allowance, export incentives, import duty exemption and concession and low-cost credit facilities to subsidized infrastructure facilities such as industrial estate.

The main vehicle of FDI inflows in ASEAN countries is through mergers and acquisitions (M & As). FDI inflows through M & As was 72% in 1994 and 66~/o in 1995. During these periods, the economies of the region has shown higher level of development which has led to stronger M & As as market structure and technology based competition. The ratio of FDI in gross fixed capital formulation ranged between 5% to 35% in the region. Intra-ASEAN investment accounts for only a small share of ASEAN's total inflow of FDI. The econometric analysis of FDI determinants showed that there was a strong positive influence of the size of the economy (GNP) on FDI inflows. The investment GNP ratio was significant for Malaysia and Thailand. However, exchange rate did not have any influence on FDI.

Foreign Direct Investment (FDI) involves the engagement of considerable assets and resources and satisfies the requirements of investment in host country. It provides the much needed foreign exchange to help bridge the balance of trade deficits. It raises the technology standards, levels of efficiency and competitiveness of the host country. It helps to improve its export performance by providing the host country better access to foreign markets.

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   A Market Effort: Model of Economic Growth


Governments have been meddling in economic activities ostensibly either to promote social welfare or higher economic growth or both in less developed counties or in non-socialist countries. The fall of the socialist countries led to concretionary role of the government in LDCs and NSCs. In there no systematic way of demarcating the role of government in economic activities, if at all it has to interfere?

We argued that at the initial stage of economic development, government may interfere in capital formation by imposing tax and thus keeping societal consumption at a lower level but it must withdraw as after a certain stage of economic development, the continuation of government economic activities will lead to contraction of the economy.

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 Fiscal Deficits and Money Growth in Nigeria: A Reaction Function Specification


In this paper, a model of monetary policy reaction to fiscal deficits and goal variables is specified and estimated for two alternative money stock measures: Ml and M2. The major finding is that during the sample period, deficit growth did not lead to money growth: rather there is strong evidence that deficit growth caused a reduction in M I growth, implying that the Central Bank adopted a defensive monetary strategy during this period. The evidence also suggests that the defensive monetary measures were the major cause of the unprecedented rise in interest rates after the deregulation, in the early 1990s. It is clear from the evidence that this strategy could not, in the face of persistent fiscal deficits, economic recession, and high level of unemployment, stop inflation from accelerating.

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  Impact of Rural Banking Scheme on Farmers' Income: Evidence from Ondo State, Nigeria


The study examined the impact of the Rural Banking Scheme on the smallholder farmers' income using Ondo State as a case study. Data for the study were obtained from a field survey of Area Agricultural Credit Officers and smallholder agricultural loans beneficiaries of the selected banks.

The results obtained from the study showed that amount of loans borrowed from the bank, cropped farm size, labour input and amount expended on capital inputs had positive and significant influence on the current farm income realised by the smallholder farmers.

The study by way of conclusion is of the opinion that with adequate supervision, if the rural bank branches can increase the amount of loans granted to smallholder farmers, the increased liquidity can be used to increase' their cropped farm size, employ more labour and purchase more improved capital inputs which will invariably lead to higher farm income for the small holder farmers.

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Pull-Push Determinants of Inter-Provincial Migration: Iran's Case Study


Investigation of determinants of migration is very important and significant, because only a proper understanding of the reasons of migration can help one to adopt a proper decision or policy in relation with it. The paper attempts to identify the most important pull-push determinants of inter-provincial migration in Iran, based on the data collected from 1996 Census for 25 provinces of Iran. It applies the OLS regression model to examine the impact of different variables on inter-provincial migration. It has been clearly observed that the variables percentage of irrigated area (IRR) and mechanization (MECH) are the significant variables in out migration (OM) and the variables amenities (AMN) and mechanization (MECH) are the significant variables in explaining the variation in immigration (1M).

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Public Resources and Quality Education at Elementary Stage: An Evidence of Non-performance in Uttar Pradesh


Salaries and job security increase the efficiency of a public employee (teacher). Larger educational expenditure in terms of higher salaries should result in qualitative improvement in education at the level concerned. The elementary stage of education in Uttar Pradesh (UP) is the largest at this leve1 in the country. But in terms of quantitative and qualitative indicators, UP is rated as an educationally backward state.

Teacher is most important in quality improvement. Despite massive increase of public expenditure at the elementary stage marking an improvement in teachers' salaries, the quality of education remained unaffected. It emanates from a larger study conducted in UP on the political economy aspects of education. The methodology is in the rubric of public choice/rent seeking framework and a principal-agent perspective. Under the former, the Govt. is seen as responding to the demands of lobbyists (teachers) in order to maximize the probability of staying in power. Rent seekers are the employees (teachers) who seek to receive benefits that are unmatched to their productivity and quality. It uses data 'of the state budgets and other publications of UP Government. The data on school performance were obtained from field surveys.

The objectives are:

(i) to study the impact of unionization of teachers in the operation of schools and quality of education,
(ii) to discover the rate of growth of real salaries vis-a-vis the rate of growth of expenditure on education,
(iii) to study the growth of public expenditure on elementary education and its correlation with quantitative expansion and qualitative improvement of schooling at elementary stage,
(iv) to assess the impact on the operation of education system of the centralization of elementary education through legislations.

The main findings are :

(1) The privilege of representation in the upper house of state legislature has been misused by the teachers.
(2) Educational expenditure at the elementary level recorded the fastest growth.
(3) Educational expenditure at elementary level grew on political pressures of the teachers' union -unrelated with qualitative improvement.
(4) Teachers' salaries went up in real terms in general, the highest increase Was recorded in CT grade (primary) teachers in Basic schools.
(5) Educational enactments have made primary teachers more 'free' and 'independent' and less accountable to their duties.
(6) Primary teachers' salaries have increased significantly, no effective change is observed in quality of education.
(7) Increasing salary expenditure on primary teachers has squeezed out non-salary expenditure causing constraints to quality improvement.
(8) Teacher unions are opposed to qualitative innovations.

The implication of the study is that educational expenditure ideally needs to be linked with quality of education in order to provide schools with incentives to become more effective.

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