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Monetary Policy and
Inflation Control: The Relevance of
Rational Expectation Hypothesis in
Contemporary Nigeria
M. O. SAIBU AND S. I. OLADEJI
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This study investigates
whether the ineffectiveness of anti-
inflation (monetary) policy could be
explained in term of the incredibility of
policy and loss of public confidence in
these policies using quarterly data from
Nigeria economy. We adopted the Rational
Expectation Theoretical framework and
specified a monetarist's model with agents
expectation formed rationally. This model
was estimated using the Two Stage Least
Square (TSL) technique. The findings from
the empirical analysis showed that public
response to government monetary policy was
slow and with extreme long lags. It was
also found that unanticipated rather than
the systematic component of monetary
policy was significant in determining the
inflation trend in Nigeria. This implies
that monetary policy has been inconsistent
and incredible over the sample period
investigated in Nigeria. We, therefore,
concluded that anti-inflation monetary
policy could be effective only if it is
credible and consistent. |
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Structural Changes in
the Indian Economy: Implications for the
Food-Surplus States.
MANOJ KUMAR AGARWAL
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Indian economy has been
showing higher growth trend during the
decade of the 1990s after performing well
in the preceding decade of the 1980s.
However, this growth trend is not followed
by many states particularly the five major
food-surplus states of India, viz., Haryana, Madhya Pradesh, Punjab, Rajasthan
and Uttar Pradesh. Although their
contribution in food grains output in the
country has been increasing, their growth
trend got lowered in the 1990s. Pattern
of structural changes in the Indian
economy and these states are also
dissimilar. Whereas, at the country level
due to structural changes in the economy,
tertiary sector has been taking the
economy forward and there is greater
inter- sectoral linkages, among the
food-surplus states the tertiary sector
could not compensate for the slowed
performance of the commodity producing
sectors. Rather, there have been weakened
relationships between agriculture and
industry. For the Indian economy to grow
at higher pace in the long run, strategy
must be designed in such a way that these states are also growing at faster pace and
showing desirable structural changes in
their respective economies and acting as
the lagging economies because the economy
also shows that the food-surplus states
are big and from northern India only. |
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Federal Government Budget
Deficits and the Crowding out of Private
Investment in the United States: Evidence
for the 1990s
RiCHARD CEBULA, JAMES KOCH, WILLIAM
PERRY AND MICHAEL TOMA
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This study investigates
whether federal government budget deficits
in the U.S. over the 1990-1999 period
acted to crowd out private investment in
new plain and equipment. Using quarterly
data, empirical estimation clearly
indicates that private investment was in
fact negatively impacted by the budget
deficit. |
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Fiscal Deficit and Private
Consumption Behaviour in Nigeria:
1970-2001
P. A. OLOMOLA AND M. A. OLAGUNJU
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The objective of this
study was to examine the linkage between
fiscal deficit and private consumption
spending in Nigeria during the period 1970
to 2001. The Vector Error-Correction
methodology was employed. The result
suggested an overwhelming evidence on the
influence of fiscal policies on private
consumption directly through the
substitution effect between private and
public consumption and indirectly through
other macroeconomic variables such as the
real interest rate, foreign savings, money
supply and domestic credit to the private
sector. |
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A Test of Monetarist Model
of Imported Inflation: A Comparison of
India's Case with Open Economies
KISHORE G. KULKARNI AND MEENAKSHI RISHI
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The paper discusses the
theory of monetary approach to balance of
payments and constructs an empirically
testable model of important inflation from
it. There are some unique feature of the
monetary approach to balance of payments
such as its focus on capital flows as a
source of disturbances in balance of
payments and the assumed stability of
demand for money of an economy. While few
economists in recent refers have tested
monetary approach to balance of payments,
there is a need of investigating the
phenomenon of imported inflation by using
monetary approach to balance of payments.
The process in which the importation of
inflation occurs is as follows: An
increase in worldwide inflation can make
an increase in capital inflow of an open
economy. In the absence of successful
sterilization process by the domestic
monetary policy, (and under fixed exchange
rates) the economy may end up with
increase in broadly defined money supply
as the foreign reserves in it go up. This
increase in money supply can be
inflationary. |
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Exchange Rate Determination
Under Currency Substitution for Asian
Countries
SANTI CHAISRISAWATSUKAND SUBHASH C. SHARMA
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In this paper, the
long-run equilibrium relationship between
exchange rate and currency substitution is
investigated for Indonesia, Japan, Korea,
Malaysia, Singapore and Thailand for the
period 1980 to 1996. The hybrid
portfolio-monetary model of exchange rate
determination is derived and extended to
incorporate the currency substitution
factor. The domestic demand for foreign
and currency (U. S. dollar) variable is
built into the model, i.e. home residents
are allowed to hold both domestic and
foreign currencies denominated assets. We
observe that currency substitution is a
significant factor along with other
fundamental macroeconomic variables (i.e.
money, income and interest rate), in the
long-run exchange rate determination for
four of the six countries examined, i.e.
Indonesia, Malaysia, Singapore and
Thailand. |
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Globalization of Business
and Information Technology
TADIBOYINA VENKATESWARLU
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The Keynesian economic
policies which address the problems of
high inflation, unemployment, and budget
deficit have been implemented by developed
and developing nations since the 1940's.
Intervention of the state in each sector
of economic activity through manipulation
of fiscal policy has not been effective
due to economic slow down. Inefficiencies
such as stag inflation (high unemployment
and high inflation rates); trade deficits;
and balance of payment deficit in the late
70's and early 80's are example of this
slowdown. Around the seventies, a new
school of thought called Monetarism (led
by Professor Milton Friedman) has come
into existence, this school of thought
attacks the Keynesian policies and offers
monetary policy without government
intervention, and allows free play of
supply and demand to solve economic
problems. Industrialized economies as
Canada, U. S. A., Germany, United Kingdom
and developing nations such as India,
Pakistan, China and Malaysia have shifted
their controlled economies to market
economies by lowering tariff barriers on
imported goods, and by allowing foreign
companies to establish subsidiaries which
can compete with domestic firms. The non-
controlled market environment in the
emerging markets of Asia, Africa and Latin
America have attracted the attention of
multinational corporations in the
industrialized world allowing them to
globalize their operations. It is
coincidence that, around the same time,
information technology had begun to
exercise its impact through varied aspects
and this has helped businesses expand
their activities. Globalization and
information technology are like two
religions merged together with the
nineties to cater to the needs of a large
group of followers. |
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Income
Convergence Under the New Economic Model:
The experience of Latin American and
Caribbean Countries
K. U. UMAKRISHNAN
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This paper examines
whether the Latin American and Caribbean
region has indeed succeeded in meeting the
challenge of development after over two
decades of the New Economic Model. The
success of the NEM of Latin America and
Caribbean region is measured here in terms
of their ability to catch up with other
developed countries in terms of real per
capita income or income convergence. Beta
and Theta estimates are used in the paper
as the measures of convergence. Theta
convergence measure indicates in increase
in the disparity between OECD and the
Latin America and Caribbean region during
the years preceding and following the
crisis of 1984-85. However, a decline can
be perceived in the post-reforms period.
Beta convergence measure for the region as
a whole does not show evidence of
narrowing income gap with the OECD.
However, the Beta convergence measure of
the sub-sample of the Latin American and
Caribbean countries that were found more
integrated with the world economy as
compared to other countries in the region,
indicate that they have been catching up
with OECD countries in the recent years. |
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Economic Reforms and
Technical Efficiency of Indian Textile
Industry: A Non-Parametric Frontier
Approach
SUNIL KUMAR
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This paper aims to
analyze the impact of economic reforms
process on the technical efficiency of
Indian textile industry using time series
data for the period 1973-74 to 1997- 98. A
non-parametric frontier approach has been
utilized to measure technical efficiency
and its components. The empirical results
indicate that the process of economic
reforms during eighties failed to mark a
significant dent on the level of operating
efficiency in Indian textile industry.
Nonetheless, a significant increase in
overall technical efficiency has been
observed during most recent phase of
liberalization process. Another important
finding of the study is that the process
of capital deepening had a positive affect
on the overall technical efficiency of
Indian textile industry. |
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Export-Led Growth
Hypothesis in Asian Countries: Co
integration and Causality Analysis
MURAT DOGANLAR
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This study investigates
the causal relation between export and
economic growth for eight Asian countries
for the period before the 1997 Asian
crises. The countries are India, Pakistan,
Philippines, Singapore, Sri Lanka, South
Korea, Thailand and Turkey. The empirical
methodology involves investigating a
co-integrating relationship between export
and output growth and specifying an error
correction mechanism to detect a causal
relation between these two series. This
study finds evidence of bi-directional
causality for Turkey, S. Korea, Singapore,
Philippines and India. However, the
causality runs from export to output
growth for Thailand and from output to
export growth for Pakistan and Sri Lanka. |
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