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No. 353

October 2008


ISSN 0019-5170



Fiscal Deficit-Inflation Nexus in Nigeria

Ogunmuyiwa, Michael' Segun

This study examines the causal linkage between fiscal deficit and inflation in Nigeria. The study performed various econometric tests such as Augmented-Dickey-Fuller (ADF) unit root test, Granger-Causality test, O.L.S. estimation and chow-break point test on time-series data from 1970-2004. The results support a unidirectional causality from inflation to fiscal deficits in Nigeria.

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Causality Relationship between
Energy Demand and Economic Growth in Nigeria

Clement A. U. Ighodaro
Ovenseri-Ogbomo Friday

This paper attempts to examine the causal relationship between electricity demand and economic growth for Nigeria using data for 1970 - 2003. The study uses the Johansen cointegration VAR approach. The ADF test statistic was used to test for stationarity of the data. It was found that the data were not stationary at level but only after first differencing i.e., the data were I (1). The Johansen co-integration technique reveals that two co- integrating relationships exist between GDP and Electricity demand in Nigeria. The result of the study reveals that there is unidirectional relationship between energy consumption and economic growth i.e., energy consumption Granger causes economic growth in Nigeria based on the available estimated data. The result has useful implications on account of energy conservation and energy related pollution in Nigeria.

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A Comparative Study of Priority Sector
Lending in India by Public and Private Sector Banks

Yogesh Gupta & Sanjeev Kumar

Commercial banking has played a very important role in the economic development of all the nations of the world. The commercial banking system in India consists of public sector scheduled banks and private sector scheduled as well as non-scheduled banks. On July 19, 1969 fourteen commercial banks with deposits worth Rs. 50 crores or more were nationalized. This was a historic event in the banking structure of the country. In 1980, six more commercial banks with deposits worth Rs. 200 crores were nationalized. At present their total number is nineteen sine, in 1993, New Bank of india was merged with Punjab National Bank. In terms of business the public sector banks now have a dominant position. The nineteen nationalized banks had 33,211 offices all over the country on June 30, 2004. In terms of branches and business done by the private sector banks are much smaller than nationalized banks. In 2004, private sector banks has a network of 5,794 branches operating in the country. Priority sector lending is an important feature of Indian banking policies. Priority sector lending is the crux of social banking, under priority sector finance is provided on liberal terms and conditions. The financial sector reforms committee set up in 1991, under the chairmanship of M. Narasimhan recommended for the withdrawal of priority sector lending limit from 40 per cent to 10 per cent. The paper mainly analyses the priority sector lending by public sector banks and private sector banks.

In section I st overall priority sector lending from the year 1997 to the year 2005 is analyzed.

In section 2nd, structure of priority sector lending from the year 1997 to the year 2005 is analyzed.

And in the last section 3rd, overall incidence of Non-Performing Assets in priority sector and sector-wise Non-Performing Assets of public sector banks and private sector banks from the year 2000 to the year 2005 is analyzed.

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Export Instability, Investment and
Economic Growth in Asian Countries:
A Time Series Analysis

Dipendra Sinha

In this study, we look at the relationship between export instability, investment and economic growth in the following nine Asian countries using time series data: India, Japan, (South) Korea, Malaysia, Myanmar, Pakistan, the Philippines, Sri Lanka and Thailand. In spite of the increasing availability of data, surprisingly, there have been hardly and time series studies on this subject. The few previous time series studies in this area have paid or have not paid any attention to the time series properties of the variables. The results are not uniform across countries casting doubts about the validity of the numerous cross-section studies. For India, Japan, Malaysia and the Philippines, we find a positive relationship between export instability and economic growth. For (South) Korea, Myanmar, Pakistan, Sri Lanka cases, economic growth is found to be positively associated with the growth of investment.

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Economic Analysis and Milk Utilization Pattern:
A Case Study of a Cooperative Milk Plant in Haryana

Sheikh Mohammad Feroze, N. K. Verma
I. K. Sawhney

The milk plants channelize the milk produced in rural areas towards the 'consumption pocket' to maintain the demand supply equilibrium and act as incentive for enhanced milk production. Milk being perishable commodity, its processing is the best alternative to enhance its keeping quality and also increase in the value of the product at each stage. There is need for proper planning to decide the product-mix and level of production for various products to become profitable and viable. Hence, the present study has specific objective of examining the milk utilization pattern and product mix of the dairy plant. Sale of milk and milk products contibuted 92.61 percent to the total revenue. The average milk arrival per day was 77.45 thousand litres and it was maximum at January. Ghee and FCM had utilized most of the total solids.

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Further Test on Stock Liquidity Risk
with a Relative Measure

Md Hamid Uddin, Wong Kie Ann
Ms Soh Siew Eng

Negative relationship between stock's return and its liquidity is established in literature that is interpreted as reflection of liquidity risk, since illiquid stocks are risker than liquid stocks, hence, illiquid stocks should earn more return. Researchers subsequently considered liquidity as another variable in asset pricing model when they found commonality in liquidity across market. Earlier studies tested stock and market liquidities independently, using measure based on stock's characteristics. We therefore, further test the relationship of stock's return with its liquidity relative to market-wide liquidity by a relative measure linking the individual liquidity with market-wide liquidity. Results confirm the negative relationship between stock's return and liquidity exists, but the relationship is non-linear and the relative measure of liquidity complements the liquidity measures used in prior studies. We also find that fluctuations in relative liquidity do not have positive effect on stock return, raising a question whether variability in liquidity . captures liquidity risk if it inherently arises from investors' inability to trade.

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Phillips Curve in India:
Theory and Evidence

Satish Verma and Ms. Deepali

In the present study an attempt has been made to examine the nature of Phillips Curve in India and to work out its implications for formulation and operation of the macroeconomic policy in India. The well known Phillips curve showed that there exists an inverse relationship between rate of change in wage rate and unemployment rate suggesting thereby a trade-off between inflation and unemployment. The present paper seeks to examine Phillips-curve using the data for Indian economy over the period 1969-2005. Along with auto regressive approach, the study utilises a comprehensive causality procedure wherein a special attention has been paid to the selection of lags and sequencing of variables. The study finds empirical evidence to support the view that there exists a trade-off between rate of change in wage rate and unemployment in India.

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Trends and Patterns of Technology Acquisition
in Indian Organised Manufacturing:
An Inter-Industry Exploration

Jaya Prakash Pradhan
Puttaswamaiah S.

With liberalization of foreign technology import policy in the 1990s, India has seen declining R&D intensity at national level. This has generated a general concern on how Indian industries are doing in technology accumulation under the new policy regime. The present study has made a preliminary attempt to analyze different modes of technology acquisition including R&D for Indian Manufacturing Industries by National Industrial Classification (NIC) Revision 1998 at 3-digit level. It has constructed a new technology indicators database for Indian Industries at NIC (1998) and also constructed a composite technology index for Indian manufacturing to examine how high-technology industries have performed during the period 1991-2002. The research revealed many interesting facts about the nature and character of technology accumulation in Indian manufacturing, which has important policy implications.

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