The New Information Age & the Stock Market Growth Puzzle

The New Information Age & the Stock Market Growth Puzzle Mr. Manoj Subhash Kamat* Mrs. Manasvi Manoj Kamat** Abstract We investigate the nexus between developments in financial intermediation with the growth in capital market activity and implications for the retail investors in India, over the post-liberalization period ranging 1993-2004. The estimations using unrestricted VAR based on error correction models, both in the short term and the long term models illustrate the short run relationship the time-series properties of stock market development and the new information age nexus. The coherent picture which emerges from Granger-causality test based on vector error correction model (VECM) further reveals that in the long run, stock market development Granger-causes financial infrastructural growth. Our findings suggest that the evolution of financial sector and in particular the stock market tends to, or is more likely to stimulate and promote economic growth when monetary authorities adopt liberalized investment and openness policies, improve the size of the market and the de-regulate the stock market intone with the objectives of macroeconomic stability. This study provides robust empirical evidence in favor of finance-led growth hypothesis for the Indian economy.Stock Market; Growth; Investor; Infrastructure Development; Causality; Cointegration; VAR; VECM; India

Implications of the WTO on Indian Marine Industry, Issues and Policy Perspectives

The outcomes of WTO negotiations under the Doha round, Hong Kong development round and the changing European Union regulations are likely to place new hurdles on the marine exports emerging from developing economies like India. In the light of the above, we attempt to discuss the impact of WTO-GATS on the Indian Marine Trade and Service industry, analyze the challenges faced by the developing countries, and suggest way-outs to respond them. Many other WTO-GATS related aspects have repercussions on the marine exports from the developing countries in Asia and India in particular; namely the outcomes from the Dispute Settlement Mechanism (DSM), the relation between trade rules and Multilateral Environmental Agreements (MEAs), Technical Assistance and Capacity Building (TA & CB) and the provisions for Special and Differential Treatment (SDT). The impact of GATS and the implications on Indian marine trade & services are specifically assessed in context of Tariff barriers, Non-tariff measures, Subsidies and Eco-labeling. Relevant policy implications follow the issues discussed.WTO, GATS, India, Marine Industry, Fisheries, Trade and Non-trade Barriers, NAMA, Implications, Policy Suggestions

Does Financial Growth lead Economic Performance in India? Causality-Cointegration using Unrestricted Vector Error Correction Models

Using contemporary models this paper explores the time-series properties of financial infrastructure and economic growth indicators to investigate the nexus between developments in financial intermediation with the economic growth for India over the 1971-2004 periods. Both over short-run and the long-run perspective the paper seeks to answer; whether the financial infrastructure variables are complementary or a substitute for economic performance? and in what way economic growth is affected by the financial infrastructural development indicators? We find evidence in favor of a short run “financial infrastructure led economic growth”. Finance is found to be a leading sector only in the short-term link in Granger causality tests with stationary variables. The study provides robust empirical evidence in favor of supply leading hypothesis for the Indian economy.Finance, Infrastructure, Development, Economic Growth, Lag-lead, Granger Causality, Cointegration, VAR, VECM, India

Volume 5 #2 Full Issue

Volume 5 #2 Full Issu

Indian Agriculture in the New Economic Regime, 1971-2003: Empirics based on the Cobb Douglas Production Function

This paper reviews the trends in Indian Agriculture before and after the introduction of the economic reforms, and the advent of WTO regime. We employ the Cobb Douglas Production Function using the OLS specification to investigate the determinants of agricultural gross domestic product for the period 1970-71 to 2002-03, during pre and post-economic reforms to document the impact of policy change (post-1992) and India’s membership of the WTO (post-1995). Our empirical findings reveal that Indian agriculture sector has witnessed Decreasing Returns to Scale after the introduction of economic reforms, indicating that the input availability is under strain during the same period.Agriculture Gross Domestic Product, WTO, Economic Reforms, Trends, Determinants, Returns to Scale, Cobb Douglas Production Function, India

Identification with Latent Choice Sets

In a common experimental format, individuals are randomly assigned to either a treatment group with access to a program or a control group without access. In such experiments, analyzing the average effects of the treatment of program access may be hindered by the problem that some control individuals do not comply with their assigned status and receive program access from outside the experiment. Available tools to account for such a problem typically require the researcher to observe the receipt of program access for every individual. However, in many experiments, this is not the case as data is not collected on where any individual received access. In this paper, I develop a framework to show how data on only each individual's treatment assignment status, program participation decision and outcome can be exploited to learn about the average effects of program access. I propose a nonparametric selection model with latent choice sets to relate where access was received to the treatment assignment status, participation decision and outcome, and a linear programming procedure to compute the identified set for parameters evaluating the average effects of program access in this model. I illustrate the framework by analyzing the average effects of Head Start preschool access using the Head Start Impact Study. I find that the provision of Head Start access induces parents to enroll their child into Head Start and also positively impacts test scores, and that these effects heterogeneously depend on the availability of access to an alternative preschool.Comment: 23 pages, plus 32 pages of supplemental appendi