Unbiased Estimation of the Half-Life to Price Index Convergence among US Cities

Cecchetti et al. (2002) estimate the half-life to price index convergence among U.S. cities to be approximately nine years. Although they correct for the small-sample bias in their panel estimate of the half-life, they do not adjust for biases that may potentially arise due to heterogeneity in the dynamic behavior of prices across cities, and time aggregation of price indices. This paper finds no evidence of significant heterogeneity in the dynamics of prices in different cities. However, corrected for the combined small-sample and time aggregation bias, the panel estimate of the half-life is found to be about seven years – two years shorter than the previous estimate.

Foreign Direct Investment (FDI) in India’s Retail Sector

This article presents an overview of retail trade in India in the wake of the country's new policy that will allow foreign capital in multi-band retailing. It discusses various potential benefits and costs of foreign direct investment (FDI) in the retail sector, particularly in terms of its effects on traditional retailers, employment, consumers, farmers, and local manufacturers. It argues that given somewhat slower growth projection for the Indian economy during the next decade, various structural issues including inadequate infrastructure and a lack of affordable real estate, and the prevalent structure of the agricultural markets, it is unlikely that all the potential benefits and costs will be realised to their fullest extent, at least in the foreseeable future. The economic dynamics and the political process will play an important role in determining the outcomes of this move to allow FDI in the retail sector and will ultimately determine the effects on various stakeholders

U.S. Trade in Information-Intensive Services

Trade in services has increased significantly and the United States has been a leader in services trade. The U.S. not only accounts for the largest share of world trade in private services but also runs a substantial amount of surplus in services trade. One important trend has been the rapid growth of U.S. trade in information-intensive services. This paper examines the growth and patterns in U.S. exports and imports of various information-intensive services. The analysis indicates that trade in business, professional, and technical services; financial services; and insurance has experienced the most rapid growth in recent times. This paper further discusses some of the intuitively plausible explanations for the growth of trade in information-intensive services.

Sectoral Price Changes and Output Growth: Supply and Demand in General Equilibrium

Price changes and output growth, both at the aggregate and the sectoral level, appear to be negatively correlated. At a basic level, this suggests that sectoral “supply” shocks are more prevalent than sectoral “demand” shocks. However, it is not clear what these sectoral price-output correlations mean once one thinks in terms of general equilibrium. To help us understand the implication of these price-output correlations, this paper examines a multi-sector dynamic general equilibrium model that includes sectoral technology shocks and sectoral demand shocks, as well as aggregate money growth shocks. We show that while a model driven solely by sectoral technology shocks can generate “plausible” price-output correlations, “demand” shocks, particularly sectoral demand shocks, are needed for the model to generate the sectoral price-output correlations observed in the data. We also show that technology shocks do not always look like “supply” shocks. Positive technology shocks to sectors producing goods that are used for investment frequently result in increases in output and prices in other sectors while positive technology shocks to sectors producing goods that are used primarily as intermediate inputs look like supply shocks in other sectors.

Trade, Foreign Direct Investment and Growth: Evidence from Transition Economies

Using fixed effects panel data approach, this paper empirically examines the effects of trade and foreign direct investment (FDI) on growth in 13 transition economies of Central and Eastern Europe, and the Baltic region (CEEB). Our analysis suggests that significant positive effect of trade on growth is a robust result for transition economies of this region. In addition, domestic investment appears to be an important determinant of growth. However, in the presence of trade in the growth equation, FDI does not seem to have any significant effect on growth. The estimation of the growth equation without trade renders FDI highly significant suggesting collinearity between trade and FDI. Furthermore, interaction between trade and FDI seems to be important for growth in transition economies. Among other findings, macroeconomic stability as reflected in the rate of inflation and fiscal balance plays a significant role in the growth process.

Export-led Growth in Bangladesh: A Time Series Analysis

This article examines time series evidence to investigate the link between exports and economic growth in Bangladesh. Using quarterly data for a period from 1976 to 2003 the article finds that industrial production and exports are cointegrated. The results of an error correction model (ECM) suggest that there is a long-run unidirectional causality from exports to growth in Bangladesh

Workers\u27 Migration and Remittances in Bangladesh

Bangladesh has sent more than 6.7 million workers to over 140 countries during a period of more than three decades since the mid-1970s. Most of these workers temporarily migrated to work in Middle East and Southeast Asia. This mass movement of temporary migrant workers has, to some extent, eased unemployment pressures on the over-burdened labor market in this highly populated country. More importantly, the remittance transfers received from these migrant workers have reached a phenomenal level of over 10 billion US dollars in 2009, approximately 12 percent of GDP in Bangladesh. This paper analyzes the trends and various other aspects of workers\u27 migration and remittances in Bangladesh. It further discusses the micro and macroeconomic impacts of remittances. While most remittance transfers have been used by migrant-sending households for consumption, there is evidence to show that these transfers have helped reduce poverty in Bangladesh. The analysis presented in this paper further indicates that these remittances may have significant effects on other macroeconomic variables as well

India's Look/Act East Policy and the Northeast Region: A Critical Perspective

India's Look East Policy (LEP) signifies a strategic shift in its international political, economic, and military relationships. Regional integration of its Northeast Region (NER) with the countries in East, Southeast, and South Asia may potentially generate economic dividends to the region. However, there are formidable challenges in realising the potentials. The proposed infrastructure projects, if completed with no further delay, will go a long way in improving connectivity with the neighbouring countries. However, improving connectivity within the region and with the rest of the country is also very important. Further, it would require a comprehensive long-term plan with well-defined projects for developing industries and services including education, health and tourism. Building infrastructure, ensuring socio-political stability and ecological balance, and improving the quality of institutions would be a major part of this plan

Foreign Direct Investment and Inequality in Productivity across Countries

Using data for 93 countries for a period from 1970 to 2000, this paper examines the effects of foreign direct investment (FDI) on cross-country differences in productivity. We construct a spatial Gini coefficient of labor productivity across countries, and weighted indices of FDI and gross domestic investment (GDI). We then examine their time series properties to explore the relations of FDI and GDI with productivity. Although we find little evidence of FDI flows – which have increased manifold in last three decades – reducing inequality in productivity for the entire sample, our analysis shows that these three variables are cointegrated for developed, high and middle income developing countries, indicating existence of a long-run equilibrium relationships between FDI, GDI and productivity. FDI seems to reduce inequality in productivity among high and middle income developing countries while it widens productivity gaps among developed countries in the long-run though these effects are statistically significant only for high income developing countries. In middle income developing countries, higher GDI seems to have significant effect in reducing productivity differences. Granger causality tests further suggest that FDI causes productivity differences among petroleum exporting countries. Furthermore, GDI granger causes FDI in high income countries and productivity differences Granger cause FDI into the middle income developing countries.