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on Central and Western Asia |
| By: | Ila Patnaik; Ajai Shah |
| Abstract: | The easing of controls on interest rates has led to higher interest rate volatility in India. Hence, there is a need to measure and monitor the interest rate exposure of Indian banks. Using publicly available information, this paper attempts to assess the interest rate risk carried by a sample of Indian banks in March 2002. We find evidence of substantial exposure to interest rates. |
| Keywords: | Interest rates , India , Banks , |
| Date: | 2004–02–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/17&r=cwa |
| By: | A. Prasad; Saibal Ghosh |
| Abstract: | It is widely perceived that competition in the Indian banking sector has increased since the inception of the financial sector reforms in 1992. Using annual data on scheduled commercial banks for the period 1996-2004, the paper evaluates the validity of this claim in the Indian context. The empirical evidence reveals that the Indian banking system operates under competitive conditions and earns revenues as if under monopolistic competition. |
| Keywords: | Competition , Banking , India , Bank reforms , |
| Date: | 2005–07–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/141&r=cwa |
| By: | Dani Rodrik; Arvind Subramanian |
| Abstract: | This paper explores the causes of India's productivity surge around 1980, more than a decade before serious economic reforms were initiated. Trade liberalization, expansionary demand, a favorable external environment, and improved agricultural performance did not play a role. We find evidence that the trigger may have been an attitudinal shift by the government in the early 1980s that unlike the reforms of the 1990s, was probusiness rather than promarket in character, favoring the interests of existing businesses rather than new entrants or consumers. A relatively small shift elicited a large productivity response, because India was far away from its income-possibility frontier. Registered manufacturing, which had been built up in previous decades, played an important role in determining which states took advantage of the changed environment. |
| Keywords: | Productivity , India , Economic growth , Trade liberalization , Demand , Public investment , Agricultural production , Manufacturing , |
| Date: | 2004–05–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/77&r=cwa |
| By: | Arvind Panagariya |
| Abstract: | Bradford DeLong and Dani Rodrik have argued that reforms in India cannot be credited with higher growth because the growth rate crossed the 5 percent mark in the 1980s, well before the launch of the July 1991 reforms. This is a wrong reading of the Indian experience for two reasons. First, liberalization was already under way during the 1980s and played a crucial role in stimulating growth during that decade. Second, growth in the 1980s was fragile and unsustainable. The more systematic and systemic reforms of the 1990s, discussed here in detail, gave rise to more sustainable growth. The paper concludes by explaining why the growth rate in India nevertheless continues to trail that of China. |
| Keywords: | Economic reforms , India , China , Economic growth , |
| Date: | 2004–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/43&r=cwa |
| By: | Amadou N. R. Sy |
| Abstract: | The large holdings of government securities by banks in India draw attention to their risk as interest rates are at historical low levels. This paper measures such a risk using duration and value-at-risk methods and assesses its current management by banks. The main finding is that some public sector and old private banks are vulnerable to a reversal of the interest rate cycle, while foreign and new private banks have built adequate defenses. In this regard, the paper makes a number of recommendations regarding government policies and individual bank practices to manage interest rate risk. |
| Keywords: | Interest rates , India , Banks , Risk premium , Bonds , Basel Core Principles , |
| Date: | 2005–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/78&r=cwa |
| By: | Tushar Poddar |
| Abstract: | India's exports nearly tripled in the 1990s. Decomposing export growth shows that it has been driven by incumbent firms rather than the entry of new firms. By using a new panel on Indian firms and estimating a dynamic discrete-choice model of the firm's decision to export, we find evidence that economic liberalization has led to greater domestic competition, spurring firm efficiency and increasing Indian firms' competitiveness and ability to export. We show that export growth has been an outcome of local firm innovation which has come about due to increased competitive pressure from FDI entry. |
| Keywords: | Competition , Exports , India , Trade , Economic models , |
| Date: | 2004–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/173&r=cwa |
| By: | Petia Topalova |
| Abstract: | This paper uses firm-level data to examine the performance of India's nonfinancial corporate sector since 1989 and evaluate its financial vulnerabilities. While promising trends in liquidity, profitability, and leverage of the sector emerged in the early 1990s, they experienced a reversal after 1996. Nonetheless, most indicators were still at comfortable levels, and there is evidence of improvement in 2002, the last year in our sample. However, a number of firms still face problems servicing their debt obligations, posing a risk to lenders. In particular, the aggregate interest coverage of the corporate sector indicates that potential nonperforming loans of the corporate sector remain high. This underscores the need for close monitoring of the corporate sector in the future. |
| Keywords: | Financial sector , India , Liquidity , Financial crisis , |
| Date: | 2004–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/64&r=cwa |
| By: | Alessandro Rebucci; Marco Rossi |
| Abstract: | This paper presents an empirical measure of disinflation credibility and discusses its evolution in Turkey since the 2001 crisis. The results indicate that credibility has improved markedly over this period, boding well for the future of disinflation in Turkey. |
| Keywords: | Disinflation , Turkey , Emerging markets , |
| Date: | 2004–11–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/208&r=cwa |
| By: | Prachi Mishra; Utsav Kumar |
| Abstract: | We evaluate empirically the impact of the dramatic 1991 trade liberalization in India on the industry wage structure. The empirical strategy uses variation in industry wage premiums and trade policy across industries and over time. In contrast to earlier studies on developing countries, we find a strong, negative, and robust relationship between changes in trade policy and changes in industry wage premiums over time. The results are consistent with liberalization-induced productivity increases at the firm level, which get passed on to industry wages. Since tariff reductions were proportionately larger in sectors that employ a larger share of unskilled workers, the increase in wage premiums in these sectors implies that unskilled workers experienced an increase in their relative incomes. Thus, our findings suggest that trade liberalization has led to decreased wage inequality in India. |
| Keywords: | Trade liberalization , India , Wages , Economic models , |
| Date: | 2005–02–04 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/20&r=cwa |
| By: | James P. F. Gordon; Poonam Gupta |
| Abstract: | This paper analyzes trends in the accumulation of NRI (nonresident Indian) deposits and investigates the determinants of these inflows. It finds that monthly deposit flows have been quite stable since the 1991 crisis; nevertheless, there have been occasions when monthly flows turned negative in the short run, coinciding with adverse domestic or external events. Econometric analysis shows that the NRI deposits are influenced by standard risk and return variables. In particular, NRI deposits respond positively to changes in relative interest rates on NRI deposits and LIBOR; negatively to political and geopolitical uncertainties, such as the government resigning in mid-term, and tensions on India's borders; and negatively to adverse external events, such as the Asian crisis. |
| Keywords: | Transfers of foreigners income , India , Foreign currency deposit accounts , Capital flows , |
| Date: | 2004–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/48&r=cwa |
| By: | Roberto Pereira Guimarães; Cem Karacadag |
| Abstract: | This paper analyzes the effects of intervention on the level and volatility of the exchange rate in Mexico and Turkey, two emerging countries that have floating exchange rate regimes. The paper finds mixed evidence on the effectiveness of intervention. In Mexico, foreign exchange sales have a small impact on the exchange rate level and raise short-term volatility, while in Turkey, intervention does not appear to affect the exchange rate level but reduces its shortterm volatility. In both cases, the findings are consistent with officially stated policy objectives, which aim to minimize the effect of intervention on the exchange rate, but cast doubt on claims that intervention is a useful tool for smoothing volatility. Although these findings cannot be generalized to other emerging markets, intervention's apparently limited effectiveness highlights the need for central banks to use their scarce foreign reserves selectively and parsimoniously. |
| Keywords: | Intervention , Mexico , Turkey , Emerging markets , Exchange market developments , Foreign exchange reserves , Floating exchange rates , Capital flows , Economic models , |
| Date: | 2004–07–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/123&r=cwa |
| By: | Dani Rodrik; Arvind Subramanian |
| Abstract: | Using a simple growth accounting framework, we project India's future potential output growth rate through 2025. We argue that there is perhaps more upside potential than downside risks to our central estimate of annual growth, which is close to 7 percent for aggregate output, or 5.5 percent for output per capita. |
| Keywords: | Economic growth , India , Production , |
| Date: | 2004–07–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/118&r=cwa |
| By: | A. Prasad; Saibal Ghosh |
| Abstract: | The paper examines the association and corporate behavior for a sample of manufacturing firms in India for the post-reform period 1992-2003. The findings suggest that a contractionary monetary policy lowers overall debt including bank debt, although the lagged response is positive, and listed firms increase their short-term bank borrowings, after monetary tightening. The responses of corporates to a monetary contraction in the post-1997 period has been more pronounced. A disaggregated analysis of responses of firms according to size and leverage largely validates these findings. Two policy implications emerge from the analysis. First, the interest rate transmission channel has strengthened since 1998, and, second, corporates in India, especially listed ones, seem to exhibit relationship lending. |
| Keywords: | Governance , India , Monetary policy , |
| Date: | 2005–02–10 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/25&r=cwa |
| By: | Petia Topalova |
| Abstract: | Using a panel of firm-level data, this paper examines the effects of India's trade reforms in the early 1990s on firm productivity in the manufacturing sector, focusing on the interaction between this policy shock and firm and environment characteristics. The rapid and comprehensive tariff reductions-part of an IMF-supported adjustment program with India in 1991-allow us to establish a causal link between variations in inter-industry and intertemporal tariffs and consistently estimated firm productivity. Specifically, reductions in trade protectionism lead to higher levels and growth of firm productivity, with this effect strongest for private companies. Interestingly, state-level characteristics, such as labor regulations, investment climate, and financial development, do not appear to influence the effect of trade liberalization on firm productivity. |
| Keywords: | Trade liberalization , India , Productivity , |
| Date: | 2004–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/28&r=cwa |
| By: | Kivanç Ulusoy |
| Abstract: | This article aims to develop a coherent explanation of the impact of the EU on Turkey’s politics between 1987 (the year Turkey applied for EU membership) and 2004, providing a more profound analysis of Turkish political transformation within the framework of its relations with the EU. It integrates Moravcsiks’ work on the human rights regime in post-war Europe with Risse’s theory on communicative action in world politics to provide an alternative explanatory framework for recent political transformation in Turkey. It will be argued that the main dynamics driving recent democratisation in Turkey were its newfound location within the European human rights regime—a result of having been granted the right to individual petition to the European Court of Human Rights just before its 1987 membership application—and the increasing power of European argument as an alternative way of resolving domestic political conflicts in Turkey. |
| Keywords: | democratization; Europeanization; fundamental/human rights |
| Date: | 2005–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:erp:euirsc:p0163&r=cwa |
| By: | Ricardo Hausmann; Catriona M. Purfield |
| Abstract: | India's fiscal problem has deep roots in its federal fiscal system, where multiple players find it difficult to coordinate adjustment. The size and closed nature of the Indian economy, aided by its deep domestic capital market and large captive pool of domestic savings, has disguised the cost of fiscal laxity and complicated the building of a consensus on reform. The new fiscal responsibility act establishes a new rules-based system to overcome this coordination failure. To strengthen the framework, we recommend an autonomous scorekeeper and the extension of similar rules to the state governments as part of a comprehensive reform of the federal system. |
| Keywords: | Fiscal management , India , Debt , Fiscal reforms , |
| Date: | 2004–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/168&r=cwa |
| By: | Abdul Abiad; Nienke Oomes; Kenichi Ueda |
| Abstract: | The study documents evidence of a "quality effect" of financial liberalization on allocative efficiency, which is measured by the dispersion in Tobin's Q across firms. Based on a simple model, the authors predict that financial liberalization, by equalizing access to credit, reduces the variation in expected marginal returns. They test this prediction using a new financial liberalization index and firm-level data for five emerging markets: India, Jordan, Korea, Malaysia, and Thailand. They find strong evidence that financial liberalization, rather than financial deepening, improves allocative efficiency. |
| Keywords: | Capital , India , Jordan , Korea, Republic of , Malaysia , Thailand , Investment , Credit , Financial systems , Emerging markets , Forecasting models , |
| Date: | 2004–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/112&r=cwa |
| By: | Sandra A. Rivera; Valerie Cerra; Sweta Chaman Saxena |
| Abstract: | One of the most significant recent developments in world trade has been the entry of China into the World Trade Organization (WTO). This paper examines the implications of China's WTO accession for India's trade, using both econometrics and computable general equilibrium (CGE) models. The paper analyzes how India stands to lose or gain from China's WTO entry in terms of both the direct and competitive channels. |
| Keywords: | World Trade Organization , China , India , Trade , Economic models , |
| Date: | 2005–06–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/101&r=cwa |
| By: | Jackline Wahba (University of Southampton and IZA Bonn) |
| Abstract: | This paper examines the influence of adult market wages and having parents who were child labourers on child labour, when this decision is jointly determined with child schooling, using data from Egypt. The empirical results suggest that low adult market wages are key determinants of child labour; a 10 percent increase in the illiterate male market wage decreases the probability of child labour by 22 percent for boys and 13 percent for girls. The findings also indicate the importance of social norms in the inter-generational persistence of child labour: parents who were child labourers themselves are on average 10 percent more likely to send their children to work. In addition, higher local regional income inequality increases the likelihood of child labour. |
| Keywords: | child labour, child schooling, wages |
| JEL: | J13 J20 O15 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1771&r=cwa |
| By: | Vlad Manole; David A. Grigorian |
| Abstract: | Bahrain's financial sector development strategy succeeded in building a leading regional banking center, which has become one of the main engines of growth and sources of employment. Although the simulations conducted in the paper suggest that the banking sector in Bahrain continues to occupy a front-runner position among those in a sample of member countries of the Gulf Cooperation Council, they also reveal that: (i) as expected, banks in Bahrain still lag behind their Singaporean counterparts, and (ii) there is strong competition from other countries in the region. The paper also finds that in terms of scale efficiency, the banks in Bahrain operate at the same level as banks in Singapore and their closest competitors in Qatar and the United Arab Emirates. The results appear to be robust with respect to changes in the sample size and model specifications. |
| Keywords: | Data analysis , Bahrain , Banking systems , |
| Date: | 2005–06–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/117&r=cwa |
| By: | David A. Jaeger (Department of Economics, College of William and Mary); M. Daniele Paserman (Department of Economics, Hebrew University) |
| Abstract: | This paper studies the dynamics of violence in the Palestinian-Israeli conflict since the outbreak of the Second (or "Al-Aqsa") Intifada in September 2000, during which more than 3,300 Palestinians and more than 1,000 Israelis have been killed. The conflict has followed an uneven pattern, with periods of high levels of violence and periods of relative calm. Using data on the number of deaths occurring each day between September 2000 and January 2005, we estimate reaction functions for both Israelis and Palestinians and find evidence of unidirectional Granger causality from Palestinian violence to Israeli violence, but not vice versa. This finding is consistent whether we look only at the incidence of fatalities or whether we look at the level of fatalities, and is robust to the specification of the lag structure and the level of time aggregation. We find little evidence that violence on either side has a direct deterrent or incapacitation effect. We do find, however, that successful assassination attempts do reduce the number of subsequent Israeli fatalities. We conclude that, despite the popular perception that Palestinians and Israelis are engaged in "tit-for-tat" violence, there is no evidence to support that notion. |
| Keywords: | Intifada, terrorism, Granger causality |
| JEL: | C32 D71 D74 H56 |
| Date: | 2005–10–09 |
| URL: | http://d.repec.org/n?u=RePEc:cwm:wpaper:22&r=cwa |
| By: | David A. Grigorian; Armine Khachatryan; Grigor Sargsyan |
| Abstract: | This paper is the first attempt to look at inflation dynamics and monetary transmission mechanisms in Armenia in the context of a full information model containing three interrelated markets: foreign exchange, money, and labor. Using the vector error correction model (VECM) approach, we find that the exchange rate pass-through to prices is very strong relative to credit, wage, and interest rate channels. The analysis suggests a relatively fast adjustment of prices to long-run disequilibria in the exchange rate market, albeit with initial overshooting of the price level. In addition, we find no evidence of prices responding to changes in money and wages in a statistically significant manner. |
| Keywords: | Price adjustments , Armenia , Exchange markets , Wages , Money markets , Labor markets , Economic models , |
| Date: | 2004–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/229&r=cwa |
| By: | Madhavi Bokil; Axel Schimmelpfennig |
| Abstract: | This paper presents three empirical approaches to forecasting inflation in Pakistan. The preferred approach is a leading indicators model in which broad money growth and private sector credit growth help forecast inflation. A univariate approach also yields reasonable forecasts, but seems less suited to capturing turning points. A vector autoregressive (VAR) model illustrates how monetary developments can be described by a Phillips-curve type relationship. We deal with potential parameter instability on account of fundamental changes in Pakistan's economic system by restricting our sample to more recent observations. Gregorian and Islamic calendar seasonality are addressed by using 12-month moving averages. |
| Keywords: | Forecasting models , Pakistan , Inflation , |
| Date: | 2005–06–08 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/105&r=cwa |
| By: | Taline Koranchelian |
| Abstract: | Drawing on the existing literature, I estimate a long-run equilibrium real exchange rate path for Algeria. I find that the Balassa-Samuelson effect together with real oil prices explain the long-run evolution of the equilibrium real exchange rate in Algeria. The half-life of the deviation of the real exchange rate from the estimated equilibrium level is about nine months, similar to that in other commodity-exporting countries. The general conclusions are that: (i) there is a time-varying long-run equilibrium exchange rate in Algeria as in other commodity-exporting countries; and (ii) the real effective exchange rate of the Algerian dinar at end-2003 was broadly in line with this equilibrium. |
| Keywords: | Exchange rates , Algeria , Commodities , Exports , |
| Date: | 2005–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/135&r=cwa |