An empirical analysis of the money demand function in India

This paper empirically analyzes India’s money demand function during the period of 1980 to 2007 using monthly data and the period of 1976 to 2007 using annual data. Cointegration test results indicated that when money supply is represented by M1 and M2, a cointegrating vector is detected among real money balances, interest rates, and output. In contrast, it was found that when money supply is represented by M3, there is no long-run equilibrium relationship in the　money demand function. Moreover, when the money demand function was estimated using　dynamic OLS, the sign onditions of the coefficients of output and interest rates were found to be　consistent with theoretical rationale, and statistical significance was confirmed when money supply was represented by either M1 or M2. Consequently, though India’s central bank presently uses M3 as an indicator of future price movements, it is thought appropriate to focus on M1 or M2, rather than M3, in managing monetary policy.

The contribution of supply and demand shifts to earnings inequality in urban China

This paper examines the degree to which supply and demand shift across skill groups contributed to the earnings inequality increase in urban China from 1988 to 2002. Product demand shift contributed to an equalizing of earnings distribution in urban China from 1988 to 1995 by increasing the relative product for the low educated. However, it contributed to enlarging inequality from 1995 to 2002 by increasing the relative demand for the highly educated. Relative demand was continuously higher for workers in the coastal region and contributed to a raising of interregional inequality. Supply shift contributed essentially nothing or contributed only slightly to a reduction in inequality. Remaining factors, the largest disequalizer, may contain skill-biased technological and institutional changes, and unobserved supply shift effects due to increasing numbers of migrant workers.

A model of economic growth with saturating demand

This study presents a model of economic growth based on saturating demand, where the demand for a good has a certain maximum amount. In this model, the economy grows not only by the improvement in production efficiency in each sector, but also by the migration of production factors (labor in this model) from demand-saturated sectors to the non-saturated sector. It is assumed that the production of a brand-new good will begin after all the existing goods are demand-saturated. Hence, there are cycles where the production of a new good emerges followed by the demand saturation of that good. The model then predicts that should the growth rate be stable and positive in the long run, the above-mentioned cycle must become shorter over time. If the length of cycles is constant over time, the growth rate eventually approaches zero because the number of goods produced grows.

Tariff reductions and labor demand elasticities : evidence from Chinese firm-level data

International production fragmentation has been a global trend for decades, becoming especially important in Asia where the manufacturing process is fragmented into stages and dispersed around the region. This paper examines the effects of input and output tariff reductions on labor demand elasticities at the firm level. For this purpose, we consider a simple heterogenous firm model in which firms are allowed to export their products and to use imported intermediate inputs. The model predicts that only productive firms can use imported intermediate inputs (outsourcing) and tend to have larger constant-output labor demand elasticities. Input tariff reductions would lower the factor shares of labor for these productive firms and raise conditional labor demand elasticities further. We test these empirical predictions, constructing Chinese firm-level panel data over the 2000--2006 period. Controlling for potential tariff endogeneity by instruments, our empirical studies generally support these predictions.

Quasi-experimental evidence on the drivers of index-based livestock insurance demand in Southern Ethiopia

Microinsurance is widely considered an important tool for sustainable poverty reduction, especially in the face of increasing climate risk. Although index-based microinsurance, which should be free from the classical incentive problems, has attracted considerable attention, uptake rates have generally been weak in low-income rural communities. We explore the purchase patterns of index-based livestock insurance in southern Ethiopia, focusing in particular on the role of accurate product comprehension and price, including the prospective impact of temporary discount coupons on subsequent period demand due to price anchoring effects. We find that randomly distributed learning kits contribute to improving subjects' knowledge of the products; however, we do not find strong evidence that the improved knowledge per se induces greater uptake. We also find that reduced price due to randomly distributed discount coupons has an immediate, positive impact on uptake, without dampening subsequent period demand due to reference-dependence associated with price anchoring effects.

Production sharing, demand spillovers and CO2 emissions : the case of Chinese regions in GVCs

This study adopts the perspective of demand spillovers to provide new insights regarding Chinese domestic-regions' production position in global value chains and their associated CO2 emissions. To this end, we constructed a new type of World Input-Output Database in which China's domestic interregional input-output table for 2007 is endogenously embedded. Then, the pattern of China's regional demand spillovers across both domestic regions and countries are revealed by employing this new database. These results were further connected to endowments theory, which help to make sense of the empirical results. It is found that China's regions locate relatively upstream in GVCs, and had CO2 emissions in net exports, which were entirely predicted by the environmental extended HOV model. Our study points to micro policy instruments to combat climate change, for example, the tax reform for energy inputs that helps to change the production pattern thus has impact on trade pattern and so forth.