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on Central and Western Asia |
| By: | Morris Sebastian |
| Abstract: | Both India and China began to reform in the early eighties, with the Indian reforms being very slow until 1991-92 after which they 'take-off' While there are many differences the crucial difference is that China adopted the same export led growth (ELG) policies of the successful East Asian economies - South Korea, Taiwan, Singapore, Hong Kong and Thailand, while Indian policies have been distinctly laissez-faire. Orthodoxy’s false understanding of ELG (the East Asian trade strategy), which was as far from laissez faire as can be imagined, is the root cause of the failure of other diversified economies in their pursuit of open door policies. Purposeful and massive under valuation of their currency was part of the East Asian strategy, which while making the ratio of exportables to importables close to their international prices, provided for simultaneous export growth and import substitution; something not possible in orthodoxy’s standard work horse -the 2x2x2 model of international trade. Simultaneous import substitution and export production is theoretically possible for economies with idle resources, with the introduction of third non-traded goods sector. ELG can therefore with compatible with little or no protectionism. This aspect of the East Asian trade (and development) strategy has been poorly understood even by the structuralists who otherwise (on the aspect of the state’s involvement) had demolished the liberal laissez-faire thesis. India's reforms have resulted in considerable discrimination against the manufacturing enterprises. Exports have grown far more slowly than was otherwise possible. The more equal distribution of income in China, and the differences in the macroeconomic policies explain most of the other observed performance differences between the two countries on aspects such as the inward flow of FDI, investment, savings, growth of particular industries. Some of he crucial dimensions of the macroeconomic policies consistent with ELG in the context of China are brought out. These are structural undervaluation of the currency, expansionary monetary policy and exchange rate targeting with only one way openness to the capital account, if at all. The character of FDI itself, which differs sharply between the two countries is related to the differences in the macro economic policies. The Chinese and the East Asian success extends the notion of 'late industrialisation' to one where external demand (along with domestic demand) is realised for the high speed expansion of manufacturing ELG. The supply side of the same strategy is build on exploiting ‘idle’ and underutilised labour which alone is capable of generating the vast gains from trade. Standard models gains from trade are incomparable small in relation. A significant part of the gains do accrue to the destination countries in the from of falling prices so that there are few political difficulties in the pursuit of ELG even by large countries like China. Thus ELG is more akin to a Lewisian process that employs previously underemployed labour for tradables goods production with rising (to high level) investment rates. India is more than ripe for ELG. It can ignore the lessons from the Chinese experience only at much cost to its growth. High growth in excess of 9% is possible with ELG since even with conservatism it is achieving 6+ %. This paper also argues that the mistaken pursuit of laissez-faire as being export led growth in India would only result in the further hollowing out of manufacturing. |
| Keywords: | India, China, Pure trade theory, multidimensional issues in trade, non-tradables, undervalued exchange rate, Export led growth, import substituion, open economy, development, late-industrialisation |
| Date: | 2005–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:2005-03-02&r=cwa |
| By: | Gandhi Shailesh |
| Abstract: | Nonprofit Organisations (NPOs) in India play an important role as change agents for social and economic development. Though they command substantial amounts of resources, their financial performance measurement and reporting is a major concern. In absence of a single regulatory authority and specific accounting standards for NPOs, the practices of accounting and reporting vary across organisations. Based on an exploratory study, this paper documents the current status on requirements of accounting and reporting vis-à-vis the current practices of NPOs, identifies the gaps, and proposes an action plan to bridge the gaps. The paper classifies the gaps in accounting and reporting under conceptual and institutional frameworks. In order to bridge the gaps in the conceptual framework, the paper recommends the need for developing a uniform accounting and reporting system for all NPOs that should start with conceptualizing information needs of the stakeholders and end with conceptualizing appropriate financial statements to meet these needs and, in the process, resolve any ambiguity in the accounting treatment of specific transactions. At an institutional level, the paper suggests consultative processes among various stakeholders to develop the proposed system and recommends a need for amendments in various Acts to implement it. |
| Date: | 2005–03–09 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:2005-03-03&r=cwa |
| By: | Nunziata, Luca (Nuffield College, Oxford, University of Milan and IZA Bonn); Bowdler, Christopher (Nuffield College, Oxford) |
| Abstract: | An empirical analysis of the impact of labour market structures on the response of inflation to macroeconomic shocks is presented. Results based on a 20 country panel show that if labour market coordination is high, the effect on inflation of movements in unemployment, import prices, tax rates and productivity is dampened, both on impact and dynamically. In contrast, monopoly power in labour supply, measured by the percentage unionisation of the workforce, appears to amplify the response of inflation to its reduced form determinants. These findings are attributed to the behaviour of wages following movements in demand- and supply-side conditions. |
| Keywords: | inflation, input price shocks, labour market coordination, trade union density |
| JEL: | E31 J51 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1510&r=cwa |
| By: | Michael Bordo; Christopher Meissner |
| Abstract: | What is the role of foreign currency debt in precipitating financial crises? In this paper we assemble data for nearly 30 countries between 1880 and 1913 and examine debt crises, currency crises, banking crises and twin crises. We pay special attention to the role of foreign currency and gold clause debt, currency mismatches and debt intolerance. We find fairly robust evidence that more foreign currency debt leads to a higher chance of having a debt crisis or a banking crisis. However, a key finding is that countries with noticeably different backgrounds, and strong institutions such as Australia, Canada, New Zealand, Norway, and the US deftly managed their exposure to hard currency debt, generally avoided having too many crises and never had severe financial meltdowns. Moreover, a strong reserve position matched up to hard currency liabilities seems to be correlated with a lower likelihood of a debt crisis, currency crisis or a banking crisis. This strengthens the evidence for the hypothesis that foreign currency debt is dangerous when mis-managed. We also see that countries with previous default histories seem prone to debt crises even at seemingly low debt to revenue ratios. Finally we discuss the robustness of these results to local idiosyncrasies and the implications from this representative historical sample. |
| JEL: | F33 F34 N20 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11173&r=cwa |
| By: | Josef C. Brada; Ali M. Kutan; Taner M. Yigit |
| Abstract: | This paper examines the effect of transition and of political instability on FDI flows to the transition economies of Central Europe, the Baltics and the Balkans. We find that FDI to transition economies unaffected by conflict and political instability exceed those that would be expected for comparable West European countries. Success with stabilization and reform tends to increase FDI inflows. In the case of Balkan counties, conflict and instability have reduced FDI inflows below what one would expect for comparable West European countries, and reform and stabilization failures have further reduced FDI to the region. Thus the economic costs of instability in the Balkans have been quite high. |
| Keywords: | foreign direct investment, transition, political instability, political risk |
| JEL: | F21 F23 P52 |
| Date: | 2004–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2004-729&r=cwa |
| By: | Christa Hainz |
| Abstract: | The number of firm bankruptcies is surprisingly low in economies with poor institutions. We study a model of bank-firm relationship and show that the bank’s decision to liquidate bad firms has two opposing effects. First, the bank receives a payoff if a firm is liquidated. Second, it loses the rent from incumbent customers that is due to its informational advantage. We show that institutions must improve significantly in order to yield a stable equilibrium in which the optimal number of firms is liquidated. There is also a range where improving institutions may decrease the number of bad firms liquidated. |
| Keywords: | Credit markets, institutions, bank competition, information sharing, bankruptcy, relationship banking. |
| JEL: | G21 G33 K10 |
| Date: | 2005–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2005-745&r=cwa |
| By: | Yener Kandogan |
| Abstract: | After a short background on recent developments in gravity modelling and liberalization agreements in Europe, this paper measures the trade creation and diversion effects of major European agreements based on the results of a correctly specified triple-indexed gravity model with bilateral fixed effects. For each agreement and partner country, welfare implications are discussed in sectors of different factor intensities with emphasis on the role of similarity in income or relative factor endowments between partners, as well as the date and the reciprocity of the agreement. This is followed by a description of the characteristics of the non-partner countries that are affected by these agreements in each sector. |
| Keywords: | Gravity Model, Fixed Effects |
| JEL: | F14 F15 |
| Date: | 2005–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2005-746&r=cwa |
| By: | Solomon Tadesse |
| Abstract: | Motivated by recent public policy debates on the role of market discipline in banking stability, I examine the impact of greater bank disclosure in mitigating the likelihood of systemic banking crisis. In a cross sectional study of banking systems across 49 countries in the 90s, I find that banking crises are less likely in countries with financial reporting regimes characterized by (i) comprehensive disclosure (ii) informative disclosure, (iii) timely disclosure and (iv) more stringent auditing. |
| Keywords: | Banking Crisis, Disclosure, Transparency, Audit Stringency |
| JEL: | G21 G28 |
| Date: | 2005–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2005-748&r=cwa |
| By: | Olivier Bertrand (TEAM); Pluvia Zuniga (TEAM) |
| Abstract: | This paper investigates the incidence of national and cross-border M&A on industrial R&D investment in OECD countries over the period 1990-1999. We use generalized method of moments (GMM) estimation techniques for dynamic panel data and control for market-related and technological determinants of R&D production. Our findings show that the last M&A wave contributed to expand domestic R&D activities, especially in high-technology intensive industries. However, further evidence suggests that cross-border M&A (particularly outward M&A), and not domestic ones, have stimulated more significantly R&D spending. This result gives evidence that anti-competition effects are more likely to affect negatively R&D activities with a domestic M&A. Reversely, efficiency gains might be higher in a cross-border operation, encouraging merging firms to raise their R&D investments. |
| Keywords: | M&A; Industrial restructuring; R&D, technology |
| JEL: | O30 L10 F23 |
| Date: | 2004–07 |
| URL: | http://d.repec.org/n?u=RePEc:mse:wpsorb:bla04072&r=cwa |