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No. 343 |
APRIL 2006 |
Vol LXXXVI |
ISSN 0019-5170 |
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Contents
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Monetary Policy Targets and Bank Liquidity
Management Practices in Nigeria: An
Inter- Temporal Analysis
Adolphus J. Toby
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This empirical work shows that the liquidity management practices of Nigerian banks have been at variance with monetary policy targets both in times of "intense" deregulation (1991-92) and "guided" deregulation (1999-2000). The evidence confirms that a reduction in the cash reserve requirement necessitated an increase in average bank liquidity and a paradoxical decline in aggregate credit to the economy.
Short-term interest rates experienced wide swings in times of "intense" deregulation with banks relying on the volatile overnight funds market to ease off temporary shortfalls in liquidity. Moreover, interest rates moderated in times of "guided" deregulation with commercial banks playing a dominant role in the Certificate of Deposit (CD) and Commercial Paper (CP) markets. This means that banks had to expand their liabilities portfolio at an extra cost of funds compensated by wider interest margins. However, there is always a need to pursue a consistent monetary policy environment to minimise the incidence of liquidity risk in the banking system.
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Stock Market as a Source of Finance :
Evidence from
Indian Private Corporate Sector
L. M. Bhole*
and
Jitendra Mahakud**
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This paper analyses the trends in equity
capital financing of Public Limited
Companies (PULCos), and Foreign Companies
in India during the period of 1966-67 to
2000-01, and estimates dynamic panel data
models (more specifically, the Generalized
Method of Moments model) by using data for
330 PULCos for the period 1984-99, for
empirically identifying the determinants
of equity capital finance. The period
analysis has also been carried out to
gauge the impact of liberalization on the
determinants of equity capital finance in
India. The paper finds that the stock
market has not acted as an important
source of finance for the private
corporate sector in India during the
period of 1966-2000. Further, it has been
found that total long-term borrowings,
size of the firm, profitability, growth
rate of the firm, liquidity and cost of
equity are the major determinants of the
equity capital financing in India.
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Financial Sector Reforms and Volatility
in Indian Stock Market
Rijo M. John*
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The Generalised Auto-regressive Conditional Heteroscedastic (GARCH) models were used to analyze if there are any changes in the pattern of returns and volatility in stock market in India before the financial and banking sector reforms in 1995-96. Using the daily returns data from National Stock Exchange, it was found that the volatility after the period 1995-96 is less compared to the previous period. The volatility in the period before the reforms was found to be higher than that of the whole period as well. It was also found that among the GARCH family of models, GARCH (1, 1) model gives the best fit according to all the model selection criteria.
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An Aggregate Import Demand Function for
Turkey: A Cointegration Analysis
Hiiseyin Kalyoncu*
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This paper estimates an aggregate import
demand function for Turkey during the
period 1994:1-2003:12. In our empirical
analysis of the aggregate import demand
function for Turkey, cointegration and
error correction modelling approaches
have been used. Empirical results
suggest that there exists a unique long
run or equilibrium relationship among
real quantities of imports, relative
import price and real GNP.
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The Relative Importance of Money Supply
and Bank Credit in the Transmission
Mechanism of Monetary Policy
Under Interest Rate Deregulation
Purna Chandra Padhan*
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This
study examines the relative importance of
money supply and bank credit in the
transmission mechanism of monetary policy
under interest rate deregulation in India,
applying vector autoregression model and
Granger causality tests. Seasonally
adjusted monthly data for 1975:04 to 2002:
12 on two alternative money stock and bank
credit measures, viz., MI, M3 and net bank
credit to government (BCG) and bank credit
commercial sector (BCC), and call money
rate and index of
industrial productions are used. The
Granger causality tests, impulse .
response functions and variance
decomposition results supports that both
money supply and bank credit are equally
important in the transmission mechanism of
monetary policy during both the periods,
i.e. pre- and post- deregulation of
interest rate. An additional evidence is
that interest rate channel emerges as
another important channel of monetary
transmission mechanism after deregulation
of interest rates.
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Women in The Labour Market:
A Spatial Analysis with Reference
to Tamil Nadu Estate
S. Sundari*
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It has been widely recognised that
education and employment are the two
powerful tools in bringing about the
empowerment of women. In this research
paper, an attempt is made to study the
trends and pattern of female employment,
problem of gender inequity in work
participation, identify the factor for
inter-district variability in female
labour force participation and also
address the recent issues in women's
employment with special reference to the
State of Tamil Nadu. The major inferences
drawn is that female work participation in
Tamil Nadu has increased only marginally
during the decades 1991-2000 ; work
participation is more among rural than
urban women, gender disparity in work
participation is relatively higher in
urban than rural areas and there is no
occupational diversification among women.
The concentration of women workers in the
occupation of 'agricultural labour', is an
indicator of women's disadvantaged
position, increased economic disparity and
poverty. Further, in rural Tamil Nadu, there is increase in unemployment, on one
hand, and greater casualisation of labour
force on the other. The study suggests
that education, training, skill formation
and access to resources are the vital
inputs for women to face the challenges of
emerging opportunities under the process
of globalization and also to achieve the
goals of empowerment and equity. |
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World Trade Organization
and Developing Nations
Tadiboyina
Venkateswarlu
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The
debate over the centralized VS market
economies and their benefits to accelerate
economic development has been debated
without an ending since the 1990s. The
published studies in the literature have
shed light over the benefits of
liberalized trade between trading nations
as opposed to protectionism and/or
controlled markets.
The paper attempts to give an overview of
the historical background of WTO regarding
its structure, aims and objectives; to
present the concerns of developing nations
towards industrialized nations in imposing
uniform standards for implementation; to
provide the role of STEs (State Trading
Enterprises) in supply management and
price setting, such as Canada, Australia
and New Zealand; and to suggest
alternatives and/or recommendations for
improved performance of WTO to gain the
confidence of developing nations in the
future.
WTO is an offshoot of GATT (General
Agreement on Trade and Tariffs) to redress
the protectionist trade practices of
countries in the post war periods of the
1920s and 1930s, especially in the United
States where the average tariff on
imported goods increased to 52 per cent
from 38 per cent. In 1946, the
International Trade Organization (ITO) has
been established to limit protectionism
and to treat all countries equally. An
intern agreement among members has
resulted in the form of GATT in 1947. The
U.S. Congress has ratified GATT without
extending any status to ITO. In Uruguay
round trade talks, member nations have
included investment, insurance,
intellectual property and communications
along with traded goods. The deliberations
on these items have led to the creation of
the WTO as an official organization in
1995 to help member nations. The
membership since then has increased to 144
from 23. The decision-making, the
membership, the dispute settlement and the
interpretation of articles in the constitution are handled by the council of
member nations through the help of the
appointed 8 member body (The Appelete
Body).
In spite of the benefits which may accrue
to developing nations because of
liberalized trade, they have not been able
to develop trust in WTO which is dominated
by industrial nations with double
standards to protect their domestic
producers and to punish developing
nations. It appears from the recent
estimates that tariff reduction by 40 per
cent on industrialized goods and
agricultural goods may benefit the global
welfare around $70 billion, half of which
may go to developing nations. The second
estimate suggests that the fulfilment of
outstanding issues of Uruguy Round Meeting
resolutions may contribute to
externalities worth $212-510 billion in
global welfare, of which $86-122 billion
goes to developing nations. However,
uniform standards in the labour, the
wages, the health and the environment
introduced by industrialized nations will
have serious negative effects on
indigenous, culture oriented industries
and small farms in which 70-75 per cent of
the population in South Asia depend for their living.
The paper also looks at the role of state
trading enterprises (STEs) who as members
of WTO act as monopolists/monopsonists in
controlling the supply, the price and the
market share in domestic and foreign
markets. Approximately, 150 STEs report to
WTO, 70 per cent of them deal with
agricultural goods and the rest with the
service sector like investment, internet
and communications. The subsidy paid to
domestic producers varies in countries
with STEs as opposed to the ones without
STEs. The marketing practices of STEs
contradict and/or violate one of the
fundamental principles, namely,
liberalized trade, for which WTO has been
formed. Lastly, the paper suggests
alternatives with recommendations to
improve the confidence of developing
nations towards WTO's role in global
welfare.
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Cointegration Tests and Spatial
Integration
of Indian Major Pepper and Cardamom
Markets with International Markets
During Pre- and Post-Liberalization Era
S.R. Rajesh* , N. Raveendaran*,
and
Anil Kuruvilla**, C. Sekhar*
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The study examines the nature and the
extent of market integration among various
domestic and international markets of
Pepper and Cardamom during pre- and
post-liberalization period. Maximum
Likelihood (ML) method of cointegration
was employed to examine the nature of
integration. Results revealed that the
prices are non-stationary in their levels
but stationary in first differences. All
the price series of pepper for different
markets both in domestic and international
during pre-liberalization and
post-liberalization periods contained a
single unit root and are integrated of
order one. In respect of cardamom,
liberalization has not increased the
strength and stability of price linkages
among various markets. During
post-liberalization, the number of markets
that were cointegrated were higher than in
the pre-liberalization period in case of
pepper. The issues associated with these
are also discussed.
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Demand for Public Goods:
A Comparative Static Exercise
S. S. Rath*
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Optimal provision of
collective goods depends on the
relationship of the private goods with the
collective good~ in the utility function
of consumers and is determined according
to the nature of resources used for its
production. This paper uses a complete
information non-strategic 2 x 2 model (2
individual 2 goods) to investigate the
optimal provision of public goods (G) for
different specifications of the utility
functions. Section II introduces a utility
function in which the public goods
produced in this period gives utility to
the individual also in the next period.
Section III works with utility function U
= f(x) g(G), [X is the private goods]
whereas section IV works with utility
function U = bl log .(x) + b2 log (G).
Later in section IV subsistence level of x
and G, Xo and Go respectively are
introduced, such that if actual
consumption of x is below xo, utility
drops to minus infinity. Finally section V
introduces labour as the productive input.
This paper is based on the hypothesis that
optimal allocation of public goods is a
solution to the free-rider problem when
there is perfect information. |
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