Effectiveness of the monetary policy framework in present-day India : have financial variables functioned as useful policy indicators

In April 1998, the RBI, the Indian central bank, formally announced a shift in its policy framework from monetary targeting to a multiple indicator approach, and since then, under this framework, the bank has considered a range of economic and financial variables as policy indicators for drawing policy perspectives. This paper aims to examine the effectiveness of this current policy framework in India by analyzing the causal relationships of each indicator variable on the objective variables. The results reveal that, except for bank credit, all indicator variables considered in this study have a causal relationship with at least either output or price level, suggesting that most preannounced economic and financial variables have served as useful policy indicators under the multiple indicator approach.

In Memory of Dr. Ali Al-Gritly (1913-1982): His Views on Egypt's experience with Socialism

This essay reexamines the great contributions made by Dr. Ali Al-Gritly to Egypt. He was the finance minister for a short period at the beginning of the 1950s and later was appointed as chairman of the Bank of Alexandria. In 1966, he completed a book (Al-Gritly [1966 (1974)]) on the economic history of Egypt. However, the book was banned from publication due to irresistible circumstances. At that time, with Arab Socialism on the ascendance, his views on certain policies were not welcomed by the top political hierarchy. In 1974, the book was finally allowed to be published, and he wrote and published another book in 1977 (Al-Gritly [1977]) on the development of the Open Door Policy and the new economic policies accompanying it.

Factors Underlying the Formation of Industrial Clusters in Japan and Industrial Cluster Policy: A Quantitative Survey

The purpose of this report is to use information provided by a questionnaire survey to analyze the factors and processes underlying the formation of industrial clusters in Japan. The study, based on questionnaire surveys, forms part of an "Industrial Cluster Project". The Japanese government has implemented policies for industrial clusters so as to enable Japanese industries to maintain competitive power in global markets, and to aid the self-sufficient expansion of local industries. The government's project goes under the heading "Industry Agglomeration for the Recovery of Local Industries with respect to so-called "Industry Clusters." The authors aim to identify what expectations are held of government by the enterprises that make up industrial clusters. As part of our investigation, we used the results of a survey conducted by UNDP in 2004. Tsuji's study, published by the Osaka School of International Public Policy, surveyed 1198 small or medium sized manufacturing companies located in O ward, Tokyo and Higashi Osaka city, Osaka prefecture. The outcome of the present study, together with data from Tsuji's work on IT usage by SMEs in Japan, is meant to form the basis for policy design and implementation.

Monetary and Exchange Rate Policy in Malaysia before the Asian Crisis

This paper provides a case study to characterize the monetary policy regime in Malaysia, from a medium- and long-term perspective. Specifically, we ask how the central bank of Malaysia, Bank Negara Malaysia (BNM), has structured its monetary policy regime, and how it has conducted monetary and exchange rate policy under the regime. By conducting three empirical analyses, we characterize the monetary and exchange rate policy regime in Malaysia by three intermediate solutions on three vectors: the degree of autonomy in monetary policy, the degree of variability of the exchange rate, and the degree of capital mobility.

The Central Bank and bank credits in the Philippines : a survey on effectiveness of monetary policy and its measures

In the post-Asian crisis period, bank loans to the manufacturing sector have shown a slow recovery in the affected countries, unexceptionally in the Philippines. This paper provides a literacy survey on the effectiveness of the Central Bank’s monetary policy and the responsiveness of the financial market, and discusses on the future works necessary to better understand the monetary policy effectiveness in the Philippines. As the survey shows, most previous works focus on the correlation between the short-term policy rates and during the period of monetary tightening and relatively less interest in quantitative effectiveness. Future tasks would shed lights on (1) the asset side – other than loan outstanding – of banks to analyze their behavior/preference in structuring portfolios, and (2) the quantitative impacts during the monetary easing period.

Asset composition of the Philippines' universal and commercial banks : monetary policy or self-discipline?

The central bank of the Philippines (Bangko Sentral ng Pilipinas, BSP) has improved its monetary policy measures since the 2000s. After rationalizing the country's banking sector since late-1990s, its monetary policy and the uniiversal/commercial banks' (UCBs) behavior in allocating their assets has changed since mid-2000s. Though further and more detailed studies are nesessary, based on the results of simple correlation analyses conducted in this paper suggest a possible mixture of the country's monetary policy and their own decision-making in asset allocations, instead of a "follow-through" attitude.

Inter-industry analysis and monetary policy evaluations in the Korean flow of funds accounts

This study mainly aims to provide an inter-industry analysis through the subdivision of various industries in flow of funds (FOF) accounts. Combined with the Financial Statement Analysis data from 2004 and 2005, the Korean FOF accounts are reconstructed to form "from-whom-to-whom" basis FOF tables, which are composed of 115 institutional sectors and correspond to tables and techniques of input–output (I–O) analysis. First, power of dispersion indices are obtained by applying the I–O analysis method. Most service and IT industries, construction, and light industries in manufacturing are included in the first quadrant group, whereas heavy and chemical industries are placed in the fourth quadrant since their power indices in the asset-oriented system are comparatively smaller than those of other institutional sectors. Second, investments and savings, which are induced by the central bank, are calculated for monetary policy evaluations. Industries are bifurcated into two groups to compare their features. The first group refers to industries whose power of dispersion in the asset-oriented system is greater than 1, whereas the second group indicates that their index is less than 1. We found that the net induced investments (NII)–total liabilities ratios of the first group show levels half those of the second group since the former's induced savings are obviously greater than the latter.

Monetary Policy Effects in Developing Countries with Minimum Wages

Using a Dynamic General Equilibrium (DGE) model, this study examines the effects of monetary policy in economies where minimum wages are bound. The findings show that the monetary-policy effect on a binding-minimum-wage economy is relatively small and quite persistent. This result suggests that these two characteristics of monetary policy in the minimum-wage model are rather different from those in the union-negotiation model which is often assumed to account for industrial economies.

An Empirical Analysis of the Monetary Policy Reaction Function in India

This paper empirically analyzes India’s monetary policy reaction function by applying the Taylor (1993) rule and its open-economy version which employs dynamic OLS. The analysis uses monthly data from the period of April 1998 to December 2007. When the simple Taylor rule was estimated for India, the output gap coefficient was statistically significant, and its sign condition was found to be consistent with theoretical rationale; however, the same was not true of the inflation coefficient. When the Taylor rule with exchange rate was estimated, the coefficients of output gap and exchange rate had statistical significance with the expected signs, whereas the results of inflation remained the same as before. Therefore, the inflation rate has not played a role in the conduct of India’s monetary policy, and it is inappropriate for India to adopt an inflation-target type policy framework.

Integration under 'One Country, Two Systems' - The Case of Mainland China and Hong Kong-

Ever since the handover of the territory in 1997, Hong Kong has had its own unique law and its own economic system and international legal personality, and has not been integrated with Mainland China. The Basic Law guarantees the uniqueness of the Hong Kong SAR until 2047. But close economic ties between Hong Kong and the Mainland will promote closer economic integration. The Basic Law limits only a customs union and the introduction of a single currency, but not the formation of a Free Trade Agreement (hereafter FTA) and monetary union. FTA has already been realized in the form of the Closer Economic Partnership Arrangement (hereafter CEPA). The Hong Kong SAR government, including the bureaucrat as well as the Chief Executive Tung Chee Hwa, was opposed to, and hesitant towards, the formation of a regional trade agreement with the Mainland, but the business community made them to adopt a positive attitude towards the CEPA. It is unclear how much integration can been deepened, but it can be argued that the current policy of the Hong Kong SAR is too supportive of business, and an excessive degree of economic integration may threaten the uniqueness of Hong Kong. But if Hong Kong achieves democracy and enjoys complete autonomy, it will be easy for economic integration to co-exist with the 'One Country, Two Systems' approach, in the interests of the business community and of the citizens of the SAR.

Trade and Business Cycle Correlations in Asia-Pacific

Recent empirical studies challenge the traditional theory of optimum currency areas by arguing that a monetary union enhances trade and business cycle co-movements among its member countries sufficiently as to obviate the need for national monetary policy. This paper examines the empirical relationship between trade and business cycle correlations among thirteen Asia-Pacific countries, paying particular attention to the structural characteristics of their economies and other issues not explored fully in the literature. According to our result, although trade is relevant to the business cycles of individual countries, the main determinant of their international correlations is not the geographical structure of their trade but what they produce and export --more specifically the extent to which their output and exports are concentrated on electronic products.

Trade, Exchange Rates, and Macroeconomic Dynamics in East Asia: Why the Electronics Cycle Matters

Against the background of increasing regional trade and investment, there is growing interest in monetary and macroeconomic policy coordination in East Asia. Although there is a sizable literature on macroeconomic linkages among East Asian countries and the potential merit of policy coordination in the region, the existing studies tend to examine these issues exclusively in terms of macroeconomic variables and do not consider how these aggregate variables are influenced by one prominent feature of a number of East Asian economies: their heavy dependence on the electronics industry. Although active engagement in the global electronics industry has been a powerful growth engine for the Asian countries, it has also left their economies vulnerable to cyclical fluctuations in the world electronics market. As the cycle of the global electronics industry exerts profound impacts on the medium-term dynamics of the Asian economies, it is imperative to take an explicit account of its influence when studying the way in which the regional economies are linked to one another and how this relationship can be altered by a specific policy initiative. We illustrate the importance of this point by examining recent studies on: (1) trade competition between China andother Asian countries and the role of the Chinese renminbi therein; and (2) the effect offluctuations in the yen/dollar exchange rate on the regional economies.

India's senior citizen's policy and an examination of the life of senior citizens in North Delhi

The paper investigates the ageing situation in India and the development of the government initiatives for the welfare of senior citizens. It also presents the initial results of a survey that the author conducted in 2011 in North Delhi. The main features related to ageing in India are 'feminisation', 'rurality' and 'poverty'. The survey in North Delhi reveals the differences between the male and the female senior citizens, and the vulnerability of the latter, in particular. The social security coverage such as pensions and health insurance was found quite limited among the respondents.