Showing papers in "South Asia Economic Journal in 2010"

Financial Development and Economic Growth in India An Analysis of the Post-reform Period

Abstract: This article examines the impact of the developments in the financial sector on economic growth in India in the post-reform period. The model of Mankiw et al. (1992) was extended to establish a relationship between financial development and economic growth. The model was then estimated using quarterly data for the period 1993 to 2005 for India, using the techniques of cointegration and vector error correction method. Cointegration results show that capital–output ratio and rate of growth of human capital have positive effects on real rate of growth of GDP, irrespective of the indicator of stock market development. An increase in the market capitalization dampens economic growth, whereas turnover has no significant effect, and an increase in the money market rate of interest has a positive effect on economic growth. Real wealth, debt burden, real effective exchange rate and the rate of growth of labour have negative effects. Vector error correction method shows that the ECM term relating to market capitali...

Credit Growth, Bank Soundness and Financial Fragility Evidence from Indian Banking Sector

Abstract: Using data on Indian banks for 1996-2008, the paper examines the interconnect among credit growth, bank soundness and financial fragility The analysis appears to indicate that higher credit growth amplifies bank fragility Besides, the results point to the fact that sounder banks increase loan supply Coming to bank ownership, the evidence testifies that credit growth has been rapid in state-owned and de novo private banks In terms of policy implications, the analysis appears to suggest the need for giving priority to risk-based supervision as a way to contain the potential risks associated with rapid credit growth

Maoist Control and Level of Civil Conflict in Nepal

Abstract: Was the Maoist influence during the insurgency in Nepal stronger in districts with high rates of poverty and inequality? In contrast to previous studies, we limit the analysis to the hill/mountain districts as very few terai (plains) districts were classified as Maoist. And we conduct separate analyses for Maoist control and level of conflict. We find that income poverty and land inequality were high in Maoist districts, while the less visible income inequality was not so important. We also demonstrate that previous findings by Murshed and Gates (2005), where landlessness appears to be important, are due to two outliers that are the core Maoist districts. Without the outliers landlessness is negatively, and not positively, correlated with Maoist influence.

Oil Prices and Economic Activity in Pakistan

Abstract: Oil price shocks have raised serious concerns among the policy makers around the world because of its adverse impacts for the net oil-importing economies This article, based on the data from 1979–

EU-India Free Trade Agreement Deal or No Deal?

Abstract: The European Union (EU) and India are currently negotiating a bilateral free trade agreement (FTA) and investment framework. There is an ongoing debate as to whether the EU-India FTA will act as a building block for the trading partners. This article addresses the broader concerns about compatibility; prospects of and the challenges to the proposed EU-India FTA; identifies the building and stumbling blocks in the ongoing negotiations; and suggests a way forward from a policy perspective. The findings suggest that to maximize the potential benefits of this FTA, trade barriers (tariff and non-tariff) in goods and services sectors should be addressed. This must be complemented by a mutually agreeable time frame to conclude negotiations in areas where interests of the partners vary.

Carbon Emissions, Energy Consumption and Income in SAARC Countries

Abstract: With global warming and the extreme climate changes in the world, controlling emissions has now become an area of focus for most countries. Although the Kyoto protocol (ratified by over 170 countri...

Global Economic Crisis and Developing Countries: Role of Vertical Specialization

Abstract: After a remarkable increase in the previous decade, world trade has been experiencing a dramatic fall in recent months. Vertical production chains have become a ‘propagation mechanism’ for these dr...

India–Sri Lanka Bilateral Trade A General Equilibrium Approach

Abstract: The India–Sri Lanka Free Trade Agreement (ISFTA) was signed between India and Sri Lanka in December 1998 and came into operation in March 2000. It is now 10 years since this FTA has been signed and during this period the bilateral trade between these two economies has reached new heights and dimensions. Against this backdrop the present article proposes a theoretical framework which provides a general equilibrium determination of the commodity pattern of trade between the economies that helps to isolate their pattern of comparative advantages. The empirical implementation of the model considers trade in 33 sectors comparable in the input–output tables of the economies. The study isolates the gains from free trade accruing to either economy. The article also explores the pattern of bilateral trade when each economy has a choice to produce goods by utilizing its own or the other country’s technology.

Money Supply and Exchange Rate Variations in Sri Lanka in the Independent Float Regime—A Time Domain Study

Abstract: The monetary model of exchange rate determination holds that cheap monetary policy of the home country leads to depreciation of the national currency. The study attempts to enquire if the rupee/dollar exchange rate variation as observed in the period of independent float regime in Sri Lanka had any link with the domestic money supply. The study of cointegration testifies that exchange rate and M2 money supply are cointegrated at level. Causality from the VEC model reveals that seven and nine month lagged money supplies cause depreciation of exchange rate. The intervention analysis through the impulse response functions and variance decomposition shows that in the forecast periods ahead there is an increasing role of money supply in the variation of exchange rate.

Measuring Technical Efficiency in the Indian Automobile Industry

Abstract: This study has measured firm-specific time invariant technical efficiency in the Indian automobile industry during 2004–06 using a suitably constructed stochastic production frontier. The one-sided inefficiency random variable is assumed to be truncated normal with a variable mode which is non-neutral with respect to some selected firm-specific factors, capable of explaining inter-firm variations in the level of technical inefficiency. It is found that age of the firm since inception and level of technical efficiency are inversely associated. However, the market share of the firm and the degree of automation are found to be positively associated with firm level technical efficiency. Statistical tests further reveal that the underlying technology in the automobile industry in India is linear homogeneous.

Evaluating the Impact of Geographic Concentration on Nepalese Agricultural Export

Abstract: This study observed and analyzed the behaviour of Nepalese agricultural export using vector error correction model (VECM). The first part of the analysis focused on the dynamic relationship among agricultural export, geographic con- centration and total agricultural production. Results of the study revealed that Nepalese agricultural export was very much dependent on the Indian markets and had positive relation with the geographic concentration index in the long run. The significant and higher error correction term indicated that the short- run fluctuations in geographic concentration and agricultural production were promptly adjusted to its long-run trend. The long-run effect of agricultural production increment on export was positive. The second part of the analysis focused on the export of niche products. The analysis in vector auto regression (VAR) form indicated that the relationship between export of niche products and geographic concentration was insignificant. Granger causality test revealed that the production granger causes export and export granger causes geographic concentration. JEL: F15, Q17

The Significance of Capital Assets in Moving Out of Poverty A Case Study of Sri Lanka

Abstract: This article investigates the importance of capital assets in moving out of poverty by reviewing the Samurdhi (Prosperity) Development Programme (SDP) implemented to eradicate poverty of Sri Lanka in 1995. One hundred and seventy beneficiaries from a randomly selected sample of the Ratnapura district were categorized into five poverty levels: extreme poor, poor, vulnerable non-poor, viable and sustainable households based on subjective range of income differences around two official poverty lines of the district for 1995 and 2009. A transition matrix estimated to examine households’ possible movements between these five poverty levels during 1995–2009 confirmed that the net impact of the poverty reduction initiatives of the SDP is highly questionable. However, the results of two multinomial logistic regressions estimated to investigate the relationship between a household’s ability to move out of poverty and the growth of its capital assets confirmed that there is a higher probability for a household to g...

Economics of Sericulture in Assam: A Comparative Analysis of Three Cultivars

Abstract: The age-old agro-based sericulture activities have been playing an important role in the generation of employment and income in a slowly progressing economy of Assam. Though all the four major varieties of silk, namely, eri, muga, mulberry and tasar are grown in Assam, the first two occupy the prime positions in the sericulture scenario of the state. Mulberry is also one of the traditional activities, but it has lost much of its competitiveness in recent times and tasar is a recent introduction and still at an infant stage. There has been a significant change in the relative position of each sericulture activity in terms of generation of employment and income and popularity among the people. The present article tries to make a comparative assessment of different silk cultures in Assam, namely, eri, muga and mulberry as a source of employment and income. It is observed that ericulture over the years has become more popular among the people, as it is still cheap and it yields more revenue to the family farm...

Institute of Policy Studies of Sri Lanka (IPS), Sri Lanka State of the Economy 2009. Colombo: Institute of Policy Studies of Sri Lanka, 2009, SL Rs 500, 21 cm, 238 pp

Abstract: South Asia Economic Journal 11:1 (2010): 131–154 cross-border procedures to reduce trade costs involved, the need to consolidate the FTAs of South and East Asia and de-regulation and policy reforms in the services sector. This book, rich in data and comprehensive analysis, should be of interest to academics, policy makers, researchers, students and anyone interested in economic development and integration in Asia. While providing deep analyses of the subject areas, the chapters also provide a good basis for those who are new to the area, giving them the required background information on integration in the region. Overall, this is an excellent publication which should be read by all interested in the subject.

Restrictive Rules of Origin and Their Circumvention Studying Rules of Origin of the India–Sri Lanka Free Trade Agreement

Abstract: This study is placed in the context of the emerging concerns regarding Rules of Origin (RoO) in Free Trade Agreements (FTAs). The first set of RoO for India, embedded in the text of the India–Sri Lanka Free Trade Agreement (ISLFTA), is analyzed with respect to its design and implementation issues. The first finding is high restrictive score of ISLFTA RoO on a comparative scale with RoO of other world FTAs. Absence of supplementary rules in their design seems to be the culprit, though such absence makes them procedurally simple. The effect of such restrictiveness on businesses is commented upon. The second issue is the circumvention of RoO norms in case of copper exports from Sri Lanka. This shows how problematic the issue of enforcement of RoO is, especially in a developing country perspective. A re-look into policy issues regarding both design and implementation of RoO is suggested.