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

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Is East and South-East Asia Including India an Optimum Currency Area?

By becoming a member of an optimum currency area, a country may be able to maximise its economic efficiency. Given the concern about a recurrence of a financial crisis akin to that of the late 1990s, it is believed that the creation of an OCA for east and south-east Asia would enhance the financial integration of the region. On the basis of some stylised facts and an empirical evaluation, this paper looks into whether India should be included in such an OCA.

Managing Pension Funds

Three issues - the absence of mortality table for the annuitants, lack of reinsurance arrangements and who is best suited to manage the funds during the accumulation phase - deserve urgent attention in the context of the government's new initiatives on pension reform.

Finance Commission Awards and Fiscal Stability in States

The authors examine the efficacy of Finance Commission awards in bringing about fiscal stability among the states. An empirical analysis reveals that though transfers helped to reduce the overall gross fiscal deficit of the states, the issue of reducing horizontal fiscal inequity is yet to be addressed. The authors find wide interstate disparity in respect of transfers and suggest streamlining disbursement criteria on the basis of individual state characteristics rather than a general approach across states.

Liquidity Measures as Monetary Policy Instruments

The Reserve Bank has in the last few years pursued active open market operation as an indirect instrument of monetary policy. The Liquidity Adjustment Facility (LAF) which was introduced on June 5, 2000 is going to play a central role in RBI's liquidity management operations. The concepts of discretionary (DL) and autonomus (AL) liquidity measures make LAF a powerful instrument of monetary policy. The two-way causation between discretionary liquidity and the call money rate, which is a prime representative indicator of availability of liquidity in the system, clearly supports the use of DL and AL in the framework of the multiple indicator approach. Also worth noting in this context is the robust link between AL, DL and the monetary condition index.

Determinants of Net Interest Margin under Regulatory Requirements

Using data for the period 1995-96 to 1999-2000, this paper seeks to identify the factors influencing spreads of Scheduled Commercial Banks in India. Among the explanatory variables, we incorporate, in addition to the standard set of variables, regulatory requirement variables. Our analysis reveals that (i) size does not necessarily correlate with higher spread, and (ii) higher fee income enables banks to tolerate lower spreads. With regard to regulatory requirement variables, it is found that (i) capital plays an important role in affecting spreads of public sector banks, and (ii) non-performing assets is uniformly important across all bank groups in influencing spreads.

Inflation Targeting

Some developed countries have practised inflation targeting as a part of monetary policy during the 1990s. Price stability is needed to create a stable and non-inflationary environment for resource allocation. Stable price expectations are necessary for long-term contracts. Successful inflation targeting requires credibility of the enforcing agency, usually the government and the central bank. Credibility in turn requires that the target be chosen carefully. This article reviews inflation targeting experience so far and analyses the issues related to it. It argues for developing an inflation model for India. Inflation targeting in India should wait until financial sector reform agenda is accomplished.

Growth-Inflation Trade-off-Empirical Estimation of Threshold Rate of Inflation for India

Empirical Estimation of Threshold Rate of Inflation for India R Kannan Himanshu Joshi The empirical analysis of growth-inflation trade-off has received keen attention in macro-economic research in the recent years. Even as it is generally argued that inflation is not good for growtht some investigators have pointed out that the negative effect is pronounced and serious only if inflation breaches its specific threshold rate for a country in question.

Monetary Approach to Balance of Payments

the system for a while. Social action and judicial intervention may slightly improve the working and living conditions of some and may bring them within the system to some extent. But all this docs not (to my mind) invalidate the broad distinction proposed by me. Those within the system have a role to play in the system (however small), some minimal degree of control over their lives, some possibilities of collective action to improve their conditions, some rudimentary safety net of social security to fall back upon, some faint hopes of a brighter future and of upward mobility. Those who are outside the system have none of these things: they can only drift helplessly along; they have no voice in any matter; they are hopelessly at the mercy of those within the system.

Monetary Approach to Balance of Payments-A Case Study of India, 1968-85

A Case Study of India, 1968-85 R Kannan In this paper an attempt is made to test whether disequilibrium in the domestic money market exerts any influence on the balance of payments (BP). This has been done along the lines of 'monetary approach to the BP.' as developed by Johnson [1972], Mundell [1968] and others. A comparison is made between elasticity approach and monetary approach in solving the BP problem. The reserve flow and sterilisation equations are estimated and the direction of causation between domestic credit and foreign exchange reserves is identified with Granger and Sims causality tests.

Demand Projections for Selected Food Items in India, 1985-86 to 2000-01

Items in India, 1985-86 to 2000-01 R Kannan T K Chakrabarty This study makes projections of consumer demand for selected foodstuffs in India for the period 1985-86 to 2000-01. The projection exercise is carried out at base year prices so as to avoid the difficulties in making allowance for price rise during the period of projection. The basic assumptions made in this study are related primarily to changes in population and consumption expenditureGov- emment policies regarding agricultural development ere assumed to remain unchanged. Besides, inter- regional homogeneity of consumer behaviour is also assumed.
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