ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by D M NachaneSubscribe to D M Nachane

Causal Inference and Scientific Explanation in Economics

The debate on causality in the social sciences in general, and economics in particular, can hardly be regarded as settled. A vital point which seems to have escaped the debate is that causal laws and economic processes themselves can change, as economic institutions evolve. Thus the standard econometric methodology of verifying and refuting hypotheses from observed realisations of time series data is seriously at fault. What is needed is a meta-theory, which also encompasses the effects of institutional change on economic processes. The search for such a theory is likely to prove elusive, but as economics attempts to push beyond its conventional frontiers of postulating static theories it is very likely to lose much of its formal mathematical seductiveness and take on more the appearance of a narrative-descriptive science. Many may regard this as retrogression, but at least a few will welcome it as a step taking our subject closer to the vision of its founding fathers such as Smith, Malthus, Ricardo and Keynes.

Are Basel Capital Standards Pro-cyclical?

The debate on bank capital regulation has in recent years devoted specific attention to the role that bank loan loss provisions play as a part of the overall minimum capital regulatory framework. The new Capital Accord is also attempting to address provisioning practices within a broad capital regulatory framework. This paper contributes to the debate by exploring the available evidence about bank loan loss provisioning in the Indian context. Using data on state-owned banks for the period 1997-2002, we find that banks tend to delay provisioning for bad loans until too late, possibly magnifying the impact of the economic cycles on their income and capital.

Does Monetary Policy Have Differential State-Level Effects?

The paper examines whether monetary policy has similar effects across major states in the Indian polity. Impulse response functions from an estimated Structural Vector Auto Regression (SVAR) reveal two sets of states: a core of states that respond to monetary policy in a significant fashion vis-à-vis others whose response is less significant. The paper attempts to trace the reasons for the differential response of these two sets of states in terms of financial deepening and differential industry mix.

Determinants of Off-Balance Sheet Activities

The paper seeks to identify the factors influencing off-balance sheet (OBS) activities of public sector banks in India. Using pooled data analysis for the period 1995-96 to 1999-2000, the analysis reveals that (i) size plays an important role in influencing OBS activities, and (ii) higher the levels of capital and liquid assets, lower the incentive of the banks to engage in OBS activities. This is in consonance with hedging theory, which contends that the aversion to risk might be an important determinant for banks not actively engaging in OBS activities.

Risk-Based Standards, Portfolio Risk and Bank Capital

Examination of the effect of risk-based standards on bank capital and portfolio risk and an attempt towards operationalising a framework for understanding the interrelationships between portfolio risk and capital in the Indian context.

Bank Response to Capital Requirements

The increased emphasis on capital regulation has raised a number of interrelated questions. First, is focusing on capital an efficient way of regulating banks? Secondly, what is the best way to structure capital regulation? Thirdly, how do banks respond to different types of capital regulation? This paper focuses on the last two questions, examining bank responses and the costs associated with these responses to capital requirements. The discussion draws heavily on international experience and concludes with an attempt to bring to bear empirically these experiences in the Indian context.

Capital Adequacy Ratios

The main purpose of bank regulation is the maintenance of a sound banking system, which is usually narrowly interpreted to mean 'prevention of bank failure'. To this end, regulators examine the riskiness of assets and the adequacy of capital. But do rigid capital adequacy ratios ensure adequate bank capitalisation in reality? Alternatives such as Value-at-Risk and Pre-Commitment models have been used in some developed countries. India needs theoretical analysis of these models and empirical data before it can consider a shift from the current capital regulatory arrangements.

The Interest Rate Imbroglio-Monetary and Fiscal Dimensions

While it may be debatable whether interest rates in India are free or not, there is no denying that financial liberalisation has taken place on an extensive scale. Equally undeniable seems to he the fact that this liberalisation has been badly managed and is directly responsible for the upward surge in interest rates which occurred in 1995-96 and which continues substantially unabated.

Ricardo versus Tooke-An Old Controversy Revisited

An Old Controversy Revisited D M Nachane H R Hatekar The bullionist controversy, stemming from the decision of the Bank of England to suspend specie payments in 1797. resulted in the first major articulation of views which were later to become crucially important to hanking and monetary theory. Paralleling the controversy in England, the Indian situation saw a ranging of participants on political as well as theoretical lines.

Intellectual Property Rights in the Uruguay Round-An Indian Perspective

Intellectual Property Rights in the Uruguay Round An Indian Perspective D M Nachane The recently concluded Uruguay Round has ushered in a new era of strengthened intellectual property protection. This is Ukely to have several consequences for LDCs. not all of which are transparent. The main focus of our paper is to examine these consequences. Special attention is also given to the specific areas in the Indian patent system where modification will be necessary and to how such modification will affect the economy at large. The pharmaceutical and biotechnology sectors are analysed in greater detail. The threat of trade retaliation is examined in the early part of the paper and the penultimate section examines the seriousness of this threat from India's point of view.

The Interest-Price Nexus-An Old Theme Revisited

The Interest-Price Nexus An Old Theme Revisited D M Nachane Almost all interest rates in India are heavily administered, so that tests of market efficiency in the strict sense appear to be redundant. However, there are three short-term interest rates, viz, the call money rate, the bazaar bill rate and the SBI hundi rate, in which market forces are allowed some role though overall ceiling restrictions are in force from time to time. The relative degree of market efficiency of these three rates is examined here using the methodology of discussions of the relation between inflation and interest rates.

Behavioural Model for Rail Freight

of the social process and has high regards for his unquestionable commitment to progressive social change, but holds it as a great tragedy that Joshi's analytical-theoretical framework seems to run counter to his cherished goals! Notes 1 V I Lenin, 'Karl Marx' in "Collected Works", Moscow, 1964, Vol 21, p 57, 2 A Gramsci, "Prison Notebooks" International Publishers, New York, 1973, p 171.

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