Forthcoming Articles

Bilateral J-Curve between India and Her Trading Partners:
A Quantitative Perspective

Abstract:
This study examines the short-run and long-run effects of real exchange rate changes on India’s trade balance vis-à-vis four of her major trading partners, viz., the US, the UK, Japan and Germany within a cointegrating vector error correction model. Cointegration estimates suggest a long-run equilibrium relationship among trade balance, real exchange rate, domestic and foreign income in each country. This study also applied generalized impulse response functions to trace the effect of a one–time shock to the real exchange rate on trade balance. Although considerable variations exists in the results, overall, the generalized impulse response functions suggest that J-curve effect is visible in India’s bilateral trade with both Japan and Germany, but the Marshall-Lerner condition appears to hold in the context of India-Germany trade. On the contrary, we did not get J-curve in India’s trade with the US, and the UK, rather we got S-curve effect in India-UK trade.
Author:
Aruna Kumar Dash

 Who Benefits from Tax Evasion?

Abstract:
In this paper, we examine the distributional effects of tax evasion, using results from theoretical, experimental, empirical, and especially the general equilibrium literatures on tax evasion. Much – if not all – of this evidence concludes that the main beneficiaries of successful tax evasion are the tax evaders themselves, with distributional effects that largely favor higher income individuals. However, when general equilibrium adjustments in commodity and factor prices are considered, the distributional effects become considerably more complicated. The work on tax compliance is also put in the broader context of the distributional effects of other types of criminal activities, where similar forces seem to be at work. We conclude with some suggestions for future research.
Authors:
James Alm and Keith Finlay

The Determinants of Economic Growth in Africa:
A Dynamic Causality and Panel Cointegration Analysis

Abstract:
This paper examines the dynamic causal relationships between trade openness, foreign-aid, domestic investment, long-term external debt, government spending and economic growth for a panel of 33 highly aid-dependent African countries for the period 1974-2009. Short-run bidirectional causality is found between economic growth and trade openness. Short-run unidirectional causalities are found from external debt to foreign aid, from trade openness, foreign aid, external debt to domestic investment, from economic growth, trade openness to external debt and also from trade openness to government spending. The long-run effects of trade openness, domestic investment and government spending on economic growth are significantly positive.
Author:
Md. Sharif Hossain and Rajarshi Mitra

The Role of Taxes as an Automatic Stabilizer:
Evidence from Turkey

Abstract:
The purpose of this study was to empirically investigate the interactions between various taxes and GDP, and to detect whether taxes function as an automatic stabilizer in Turkey. Firstly, When using a time series unit-root test as proposed by Dickey-Fuller (1979), econometric findings revealed that taxes and level of GDP are not static. Secondly, upon employing cointegration designed by Johansen (1988), it was found that GDP and taxes are cointegrated. Thirdly, the Granger (1969) causality test showed that a uni-directional causality exists among taxes, and the causal relationship is between GDP to SCT, and from VAT and CIT to GDP. On the other hand, there was a bi-directional causality between GDP and PIT. Empirical findings showed that personal income tax is the most effective tax in stabilizing business cycle fluctuations. Corporate income tax is also important.
Author:
Hüseyin Şen and Ayşe Kaya

Evaluating the Effects of Monetary Policy Shocks
on GCC Countries

Abstract:
For the first time, this research assesses monetary policy shock effects on GCC members over the last 17 years using a structural vector autoregressive (SVAR) model baseline. While GCC states peg their currency to the US dollar, the contemporaneous coefficient in the structural model indicates that for GCC countries a monetary policy instrument responds positively to unexpected increases in M2, while a monetary aggregate reacts negatively to interest rate shocks. However, our findings indicate that these countries’ interest rate channel is weak. Furthermore, oil price innovation contributes to most output fluctuations in the short horizon, and M2 and Federal Fund Rates shocks are responsible for most output movements in the long horizon.
Author:
Sayyed Mahdi Ziaei

Adaptive Expectations and Dynamic Models for
Network Goods

Abstract:
In this work, we consider a utility function that is influenced by the value of network externality function at the consumer’s expected market size/share. Using this utility function, a market share adjustment function is introduced and is utilized to develop dynamic models of existing rational and static expectation processes. In addition, the role and scope of dynamic models of market share adjustment process are extended to the well-known adaptive expectation and its extension processes. The properties of equilibrium states of dynamic models are investigated which include location, stability, oscillation and the initial states in systematic and unified way. The most significant byproduct of presented results is that the properties of equilibrium states depend on the type of consumer expectation of a network good and the parameters of dynamic market share adjustment processes.
Author:
Arnut Paothong and G.S. Ladde

Credit Rating Agencies: The Importance of Fundamentals
in the Assessment of Sovereign Ratings

Abstract:
The aim of this paper is to investigate the significance of a set of macroeconomic var- iables in the assessment of the sovereign ratings provided by the three main credit rat- ing agencies in different periods in time and for countries belonging to different cate gorizations. Ratings have a great economic importance as they constitute the main drivers for attracting foreign investments and can influence the dynamics of interest rates. By grouping the countries according to levels of development and indebted ness, we provide the analysis of the weights attributed to each one of the macroeco- nomic indicators included in the analysis. Furthermore, it is of interest to examine how ratings are constructed and if they exhibit a historical coherence that goes be yond the economic cycles. The analysis rests on an unbalanced panel of 139 countries in the period 1975-2010. In order to provide an answer to ratings’ historical coher- ence, we selected two sub-periods: 1975-1996 and from 1997 onwards. Static esti mates findings show that per capita GNI, inflation, unemployment, fiscal balance, government debt and default history significantly affect ratings, while GNI growth and current account balance are less relevant. Furthermore, Granger causality results underline that a one-way causality runs from average ratings to economic growth.
Author:
Vanja Bozic and Cosimo Magazzino

 Participatory Job Demand and Efficiency of Performance of NREGS in Rural
Asset Creation: An Analysis inthe Context of West Bengal, India

Abstract:
The participation and performance impact of National Rural Employment Guarantee Scheme on the villagers in India is likely to be felt by the diversity of rural asset creation works, timeliness of payments, rate of payment, number of working days etc. In this context a model has been developed for analytically assessing the positive impact of mass participation on rural asset creation. Participatory response of job card holders is also analysed by employing suitable regression. Further focus is made on overall performance efficiency of the scheme in alleviating the hardship and job problem of rural households along with policy recommendations.
Author:
S.K. Datta and K. Sing

The Growth of Government Spending in Lesotho

Abstract:
The paper analyses the dynamics of government spending growth in Lesotho using the multivariate cointegration techniques for the period 1980-2010. The results indicate that government spending is positively related to income and population while negatively related to tax share in the long-run. The latter supports the idea of fiscal illusion caused by budget deficits, which lessen the perceived cost of public spending to taxpayers. The role of internal and external shocks on government spending is also investigated in this study but such factors are found to be less important in determining the growth of government expenditure in Lesotho.
Author:
Retselisitsoe I. Thamae

Does Heavy Drinking by Adults Respond to Higher Alcohol
Prices and Taxes? A Survey and Assessment

Abstract:
Higher alcohol prices and taxes are frequently proposed as a policy tool to deal with abusive consumption and adverse alcohol-related outcomes. Its success depends on price responsiveness of drinkers, especially heavy drinkers. This survey examines empirical studies of the price responsiveness of heavy-drinking adults. Additionally, the survey examines the relationship between alcohol prices and mortality due to liver cirrhosis. A review is conducted of 19 individual-based studies that examine price responses by heavy-drinking adults and nine studies of prices and cirrhosis mortality. The review finds only two studies of heavy drinking with a significant and substantial negative price response. For cirrhosis mortality, only two studies find a significant negative price response. Overall, the role of price and taxes as a significant deterrent to heavy drinking by adults is uncertain.
Author:
Jon P. Nelson

 Globalisation and Cointegration among the States and Convergence
across the Continents: A Panel Data Analysis …

Abstract:
This paper attempts to examine the level of cointegration among various nations across continents with respect to their globalisation. An approach is also made to analyse the nature of inter- and intra-continental globalisation and its variation over time. The proximity and convergence over time, in terms of the growth of globalisation is examined by using a panel data set over a period from 1970 to 2007. The outcome reveals the presence of co-integration among selected nations. The European nations are more co-integrated than those in other continents. They are closely followed by the countries in Africa and Asia. The proximity matrices of overall globalisation and political globalisation provide some important indications that geographical proximity, economic necessities, cultural and political understanding play a crucial role in determining the clusters of countries in terms of globalisation.
Author:
Utpal Kumar De
Download:
Full Text PDF (0.46MB)

 An Empirical Analysis of the Determinants of Passenger Rail
Demand in Melbourne, Australia

Abstract:
Considerable yet largely unexpected growth in passenger rail demand has occurred recently in Australian capital cities. This article uses historical data, together with modern time series methods, to examine empirically the factors that might have contributed to growth in passenger rail demand in Melbourne, Australia, and to gain greater insight into the relationships between the various explanatory variables. A cointegration approach is used to estimate the long-run rail elasticities, while an error correction model is used to estimate short-run elasticities. The study finds that the short- run rail elasticity is twice as low as the long-run elasticity, although both are highly inelastic. The inelastic nature of the demand suggests that a fare increase would not lead to a significant drop in boardings, and hence results in a rise in total revenue. In addition to the fare, city population, petrol price and passenger income exert a positive impact on passenger rail demand.
Author:
Albert Wijeweera and Michael Charles