Does monetary policy matter in a less developed economy? Evidence from Bangladesh

This paper explores the role of monetary policy in the context of a less developed economy. Monetary transmission mechanisms in less developed economies can be quite different from an industrialized economy, as unlike industrialized countries, these economies are characterized by the small size of organized financial markets, limited substitutability between money and other assets and weak fiscal and monetary institutions. We utilize the Structural VAR approach to analyze the monetary transmission process and impacts of monetary policy on different macro variables in Bangladesh. Monetary policy shocks are identified using non-recursive contemporaneous restrictions, which are based on the Central Bank's reaction function and the structure of the economy. We found strong evidence for the interest rate channel of monetary policy in Bangladesh. Our findings indicate that monetary policy shocks are important sources of fluctuations in the rate of interest, output and prices. Expansionary monetary policies are found to be harmful for achieving price stability in Bangladesh, as they not only increase the prices permanently, but also make the price level more volatile. We also found the evidence of a long lasting effect of monetary policy on output, which suggests that contractionary policy measures may create sustained recession in Bangladesh.

Analysing the transmission pattern within the framework of housing supply and monetary policy in Australia

Housing supply is one of important components of the housing sector. Compared with an increasingly strong housing demand, the growth rates of total housing stock in Australia have exhibited a downward trend since the end of the 1990s whilst the significant adjustments in the Australian monetary policy were being implemented. This research aims to estimate the nature of the relationship between housing supply and monetary policy by a vector error correction model. According to the empirical results, a transmission pattern comprised of the indicators associated with housing supply and monetary policy can be identified, which suggests that there is a significant interrelationship between monetary policy and the supply side of the housing sector in Australia.

An analysis of Fiji's monetary policy transmission

Purpose – The purpose of this paper is to examine the monetary policy transmission mechanism for the Fiji Islands using a structural vector autoregressive (SVAR) model for the period 1975 to 2005.

Design/methodology/approach – The SVAR model investigates how a monetary policy shock – defined as a temporary and exogenous rise in the short-term interest rate – affects real and nominal macro variables; namely real output, prices, exchange rates, and money supply.

Findings – The results suggest that a monetary policy shock statistically significantly reduces output initially, but then output is able to recover to its pre-shock level. A monetary policy shock generates inflationary pressure, leads to an appreciation of the Fijian currency and reduces the demand for money. The paper also analysed the impact of a nominal effective exchange rate (NEER) shock (an appreciation) on real output and found that it leads to a statistically significant negative effect on real output.

Practical implications – The findings of this study should be of direct relevance to the research and policy work undertaken at the Reserve Bank of Fiji.

Originality/value – For a small economy, such as Fiji, where monetary policy is key to sustainable macroeconomic management, this is the first paper that undertakes a dynamic analysis of monetary policy transmission. The paper uses time series data over three decades and builds a structural VAR model, rooted in theory. This paper will be of direct relevance to the Reserve Bank of Fiji. The approach and model proposed will also be useful for applied monetary policy researchers in other developing countries where inflation rate targeting is a key element of the monetary policy setting.

Terms of trade shocks and monetary policy in India

Central banks in emerging market economies often grapple with understanding the monetary policy response to an inter-sectoral terms of trade shock. To address this, we develop a three sector closed economy NK-DSGE model calibrated to India. Our framework can be generalized to other emerging markets and developing economies. The model is characterized by a manufacturing sector and an agricultural sector. The agricultural sector is disaggregated into a grain and vegetable sector. The government procures grain from the grain market and stores it. We show that the procurement of grain leads to higher inflation, a change in the sectoral terms of trade, and a positive output gap because of a change in the sectoral allocation of labor. We compare the transmission of a single period positive procurement shock with a single period negative productivity shock and discuss the implications of such shocks for monetary policy setting. Our paper contributes to a growing literature on monetary policy in India and other emerging market economies.

Valuation and reporting of native fauna in monetary terms: compatibility between a market-Based system and natural resources?

A change in community values and priorities has introduced ethical,
environmental and social issues into the way in which business conducts
its activities. There are an increasing number of managed investment funds focusing on socially responsible investment (SRI) by concentrating on firms that operate according to predetermined criteria for environmental, social and ethical issues. For investors in these funds environmental stewardship issues are integrated with concern over financial resources and performance. In this paper the accounting and reporting by business activities concerned with conservation of wildlife are examined. The world of accounting has functioned for many years with relatively few accounting standards devoted to specialised industry needs. In 1998 the Australian Accounting Standards Board and in 2001 the International Accounting Standards Board issued standards devoted to agriculture. Both standards deal with the reporting of managed biological assets and require application of essentially the same approaches despite the Australian standard requiring net market value while the International standard requires fair value. In this paper we analyse how one conservation firm Earth Sanctuaries Ltd. (ESL) has applied AASB 1037 and then we explore the implications for conservation firms operating in geographical locations outside Australia. It is suggested that AASB 1037 and indeed lAS 41 may not provide value appropriate information for investor decisions relating to accounting profits for such firms. Our examination shows that it is appropriate to reconsider accounting guidelines provided by these standards in order to link the information relating to economic and environmental performance. Transparency may be improved by a move closer to Elkington 's (1997) triple bottom line reporting. We therefore contend that the issues arising from the use ofAASB 1037 and lAS 41 need to be widely considered by all standard setters, particularly given the increasing attention to SRI.

The adjustment of children of Australian Vietnam veterans: is there evidence for the transgenerational transmission of the effects of war-related trauma?

Objective: The presence of posttraumatic stress disorder (PTSD) in trauma survivors has been linked with family dysfunction and symptoms in their children, including lower self-esteem, higher disorder rates and symptoms resembling those of the traumatized parent. This study aims to examine the phenomenon of intergenerational transfer of PTSD in an Australian context.

Method: 50 children (aged 16–30) of 50 male Vietnam veterans, subgrouped according to their fathers' PTSD status, were compared with an age-matched group of 33 civilian peers. Participants completed questionnaires with measures of self-esteem, PTSD symptomatology and family functioning.

Results: Contrary to expectations, no significant differences were found between the self-esteem and PTSD symptomatology scores for any offspring groups. Unhealthy family functioning is the area in which the effect of the veteran's PTSD appears to manifest itself, particularly the inability of the family both to experience appropriate emotional responses and to solve problems effectively within and outside the family unit.

Conclusion: Methodological refinements and further focus on the role of wives/mothers in buffering the impact of veterans' PTSD symptomatology on their children are indicated. Further effort to support families of Veterans with PTSD is also indicated.

Gay men's estimates of the likelihood of HIV transmission in sexual behaviours

In 3 studies we recorded gay men's estimates of the likelihood that HIV would be transmitted in various sexual behaviours. In Study 1 (data collected 1993, n=92), the men were found to believe that transmissibility is very much greater than it actually is; that insertive unprotected anal intercourse (UAI) by an HIV-infected partner is made safer by withdrawal before ejaculation, and very much safer by withdrawal before either ejaculation or pre-ejaculation; that UAI is very much safer when an infected partner is receptive rather than insertive; that insertive oral sex by an infected partner is much less risky than even the safest variant of UAI; that HIV is less transmissible very early after infection than later on; and that risk accumulates over repeated acts of UAI less than it actually does. In Study 2 (data collected 1997/8, n=200), it was found that younger and older uninfected men generally gave similar estimates of transmissibility, but that infected men gave somewhat lower estimates than uninfected men; and that estimates were unaffected by asking the men to imagine that they themselves, rather than a hypothetical other gay man, were engaging in the behaviours. Comparison of the 1993 and 1997/8 results suggested that there had been some effect of an educational campaign warning of the dangers of withdrawal; however, there had been no effect either of a campaign warning of the dangers of receptive UAI by an infected partner, or of publicity given to the greater transmissibility of HIV shortly after infection. In Study 3 (data collected 1999, n=59), men induced into a positive mood were found to give lower estimates of transmissibility than either men induced into a neutral mood or men induced into a negative mood. It is argued that the results reveal the important contribution made to gay men's transmissibility estimates by cognitive strategies (such as the 'availability heuristic' and 'anchoring and adjustment') known to be general characteristics of human information-processing. Implications of the findings for AIDS education are discussed.

Regulatory change, structural breaks, and transmission effects in HSIF and HSI volatility

A systematic BEKK-GARCH model with multiple switch points in the variance equations captures the structural changes that have taken place in the Hong Kong markets. Abolishment of the uptick rule in the Hong Kong stock market, increase of initial margins, and electronic trading of Hang Seng Index Futures are found to have significant impacts. These changes affect the volatility structure of the HSI and HSIF and hence their lead-lag relationship. The multivariate GARCH model with three specific switching points is found to be superior to any other combination of up to six separate switch points.

Community-based study on knowledge, attitude and practice on the mode of transmission, prevention and treatment of the Buruli ulcer in Ga West District, Ghana

Buruli ulcer disease (BUD), a devastating tropical disease caused by Mycobacterium ulcerans, occurs in more than 80% of the administrative districts of Ghana. To elucidate community perceptions and
understanding of the aetiology of BUD, attitudes towards Buruli patients and treatment-seeking behaviours, we conducted a survey with 504 heads of households and seven focus group discussions in Ga West District, Ghana. Although 67% of participants regarded BUD as a health problem, 53% did not know its cause. Sixteen per cent attributed the cause to drinking non-potable water, 8.1% mentioned poor personal hygiene or dirty surroundings, and 5.5% identified swimming or wading in ponds as a risk factor. About 5.2% thought that witchcraft and curses cause BUD, and 71.8% indicated that BU sufferers first seek treatment from herbalists and only refer to the hospital as a last resort. The main
reasons were prospects of prolonged hospital stay, cost of transport, loss of earnings and opportunity associated with parents attending their children’s hospitalization over extended period, delays in being
attended by medical staff, and not knowing the cause of the disease or required treatment. The level of acceptance of BUD sufferers was high in adults but less so in children. The challenge facing health workers is to break the vicious cycle of poor medical outcomes leading to poor attitudes to hospital treatment in the community. Because herbalists are often the first people consulted by those who contract the disease, they need to be trained in early recognition of the pre-ulcerative stage of Buruli lesions.

Transmission electron microscopy characterization of the bake-hardening behavior of transformation-induced plasticity and dual-phase steels

The effect of prestraining (PS) and bake hardening (BH) on the microstructures and mechanical properties has been studied in transformation-induced plasticity (TRIP) and dual-phase (DP) steels after intercritical annealing. The DP steel showed an increase in the yield strength and the appearance of the upper and lower yield points after a single BH treatment as compared with the as-received condition, whereas the mechanical properties of the TRIP steel remained unchanged. This difference appears to be because of the formation of plastic deformation zones with high dislocation density around the “as-quenched” martensite in the DP steel, which allowed carbon to pin these dislocations, which, in turn, increased the yield strength. It was found for both steels that the BH behavior depends on the dislocation rearrangement in ferrite with the formation of cell, microbands, and shear band structures after PS. The strain-induced transformation of retained austenite to martensite in the TRIP steel contributes to the formation of a complex dislocation structure.