An Attempt to Develop a Suitable Model for Forecasting Bank Credit in Pakistan

An attempt has been made in this study to develop a suitable time series econometric model for forecasting the credit structure in Pakistan. The relevant data has been obtained from the website of State Bank of Pakistan (SBP) regarding the amount of credit given to the private sector for the sake of economic activity and its development. The data thus obtained was of time series type in months starting from July 1990 to June 2010. Keeping in mind, the influence of months’ effect, eleven dummy variables have also been introduced in analysis to address this issue. In order to develop a suitable forecast model for credit to private sector, first of all Augmented Dickey-Fuller (ADF) test has been applied to check the level of integration as the data contains a secular trend. It has been observed through ADF test that the credit to private sector data has two unit roots (i.e., it is integrated of order 2). By applying various models like ARIMA, ARCH, and GARCH, decision has been in favor of GARCH (1,1) model as it contains some significant AR and MA terms of specific order along with influential months of the year that describe the possible patterns in the credit to private sector data. Moreover it has been observed that the months of January, February, April, May, June and July are the significant months explaining the variation in the credit data along with AR term of order 12 and MA terms of order 1 being significant. Keywords: Banking Sector, Credit, Central Bank, Monetary Policy, GARCH Model, Investment, Time Series Model JEL Classification: E52, E51, E62, C32, E5

Impact of Financial Fragility on Sovereign Bond Spreads: An Empirical Analysis for BRICs Region

The paper investigates the impact of financial fragility on the sovereign bond spreads of the four rapidly rising emerging economies Brazil, Russia, India and China (BRICs). Using fixed effect model, a comparison is being made among different models after including and excluding Financial Stress Index (FSI) from the base line model. The results suggest that financial fragility is a major determinant of sovereign bond spreads than other macroeconomic factors as it appears to be highly significant in all estimations. Moreover it has been observed that by adding FSI, the explanatory power of the model has increased quite prominently. The significance of FSI depicts the importance of idiosyncratic financial environment in financing conditions of BRICs by showing the transmission of financial stress through financial and economic linkages. The results also indicate the importance of local factors in explaining the sovereign bond spreads of BRICs economies that is in conforming to past studies. Keywords: Fragility, Bonds, Trade, Public Debt, Financial markets, Interest Rates

Public Policies versus Institutional Structures: A New Perspective of Assessing Economic Growth Dynamics in Developing Nations

This study is performed to find out the impact of policy and institutional factors on the economic growth of the developing countries. These include Economic management, Structural policies, Social inclusion/equity and Governance. Panel data of 72 countries is being taken for this study and the time period is from 2005-2013. Simple ordinary least square (OLS) model has been applied to find the impact of these variables on economic growth of developing countries and the results showed that overall institutions are related more to the economic growth of these nations as compared to policy contents. On the other side from institutional parameters, role of budgetary management and equity of public resource use by the government is positively contributing to economic performance of these nations. Nevertheless few variables have showed negative impact as well in which the process resource mobilization and transparency of the system is exhibiting more negative role in economic growth of these nations. Overall results showed that non-economic parameters of the political systems are more closely interrelated with the process of economic growth in these nation as compared to pure economic factors. Key Words: Fiscal Policy, Economic Integration, Budget, Debt Management, Government Regulations, Economic Development JEL Classification: E63, F15, H61, H63, I18, O1

Institutional determinants of tax buoyancy in developing nations / Munnaza Ashraf, Dr. Saima Sarwarb

This study was conducted to examine the role of institutions on tax buoyancy in a set of developing nations. The analysis of 50 nations from the time period 1996-2013 indicates that mostly institutional factors such as bureaucratic efficiency, rule of law, corruption are affecting negatively to the tax collection in these regions. Revenue from indirect taxes is more sensitive to these non-economic factors in a society. Moreover, the study suggests that nature of relationship between tax buoyancy and institutional characteristics of the system is sensitive to different categories of political regimes i.e. Democracy and Autocracy. Results showed that democracy is affecting positively to the tax collection while autocracy is having negative impact in each case i.e. direct, indirect or total tax revenues. But in autocratic regimes, proportion of indirect and direct taxes in total revenue is more than in case of democracy. Findings help to suggest that efforts should be made to democratize the political system mostly in developing world so that more and more tax revenue generation could be made possible

An Empirical Investigation Between Trade Liberalization And Corruption: A Panel Data Approach

The present study empirically investigates the relationship between trade liberalization and corruption, using data from twenty four countries divided into three panels: low income, middle income and high income countries for a 13 years period, from 1995-2007. That period is taken to see this effect after the establishment of WTO.  Many other economic and non economic variables have also been incorporated in this study. Fixed effect model have been used for estimation. The results show that trade liberalization is both statistically significant and negatively correlated to the corruption level of these countries included in the study. The results are robust even after controlling for other variables like economic freedom, democracy, size of bureaucracy, average income level and level of education. The focus of study is mainly on South Asian nations. Because according to the recent survey published by Transparency International related to Corruption, these nations are at the bottom of ranking ladder. Keywords: Corruption, Trade liberalization, Economic Freedom, Bureaucracy, Education

Welfaremindedness in Trade Policy Decision Making Process: A Qualitative and Quantitative Analysis from Developing Nations

The proposition of free trade has been one of the most important tenets of economists for the past two centuries. They have been of the view that free trade will be in benefit of nations in most of the cases. But “new trade theory” and “infant industry argument” does not support this principle of trade. Therefore now economists are trying to seek out not only economic rather political determinants of protection in nations. So this study has basically tried to see how government maximizes welfare of the society in designing trade policies specifically in developing countries. Moreover the whole developing region has been divided regime wise, domestic institutional wise and  income wise. Both quantitative and qaualitative analysis has been performed. Grossman Helpman model has been employed for estimating these welfare estimates. Time span of the study is from 1995-2010. And GTAP7 has been used for extracting data for intermediate inputs. Welfare mindedness has been calculated with lobby and without lobby formation in an economy. Results are very much close to the present world scenario that more rich and democratic nations are more welfare concerned than poor and autocratic nations. More over parliamentary democracies proved more welfare oriented than presidential democracies

Terrorism or Political Terrorism Vs Tourism: New Evidence from Developing Countries

In the 21st century, tourism emerges as a significant income generating sector as well as weapon for growth and survival for various countries[1]. Tourism is the largest global industry with continuously growing global market which will triple in size by 2020[2]. Besides, numerous natural and human-caused disasters, the threat that accompanies political turmoil, tends to frighten potential tourists more severely. Such uncertainties in an economy can impede the flow of tourism. Terrorism risk tends to intimidate the traveling public more severely—as demonstrated by the realignment of travel flows and cancellation of vacations during periods of heightened terrorist activity. The tourism industry is highly vulnerable to such disturbances—whether social or political (i.e., riots, insurgency, terrorism, crime, political upheaval, war, regional tensions). This study also aims at finding a nexus between Terrorism and tourism based on new evidence from developing nations. Moreover developing nations have been further divided into two panels i.e. Politically Free , and Politically Not Free nations. This classification has been made to see whether political environment also affects terrorism activities in nations or not. Similarly another important aspect of this study is to see whether simply terrorist’s activities or Political terrorism[3] is a hurdle for the development of an economy. For this purpose different variables related to political terror and failures have also been used. Moreover time span for the study is from 1995-2011. Both parametric and non-parametric approaches have been employed. For evaluating the impact of Terrorist activities, data has been taken from World Governance Indicators(WGI), while data for tourism is from World Tourism Organization (UNWTO). Keywords: Tourism, Economic Development, panel Data [1] E. T. Heath, “Globalization of the Tourism Industry: Future Trends and Challenges for South Africa,” South African Journal of Economic and Management Sciences, vol. 4, pp. 542-569, 2001. [2] World Tourism Organization, World Tourism Barometer. [3] E. Neumayer, “The impact of political violence on tourism: Dynamic cross-national estimation,” Journal of Conflict Resolution vol. 48(2), pp. 259-281, 200

Choice between economic reforms and political reforms: an empirical analysis for financial development / Azka Jamil Akhter and Saima Sarwar.

The purpose of this study is to investigate the impact of economic and political reforms on the decisions related to Financial Sector development both in developed and developing nations. Panel of sixty nations divided almost equally in both sections for the time period 1990-2012 has been used. Using Discroll-Kraay Fixed Effect estimation technique, results revealed that in all cases either for whole panels or for separate developing and developed nations, process of economic reforms is playing most important role in the development of this sector among all other variables and this becomes more prominent in case of developed nations. While among political factors, role of Governance has been observed positive and strongly significant in its impact on the development of this sector for all cases. But Democracy showed positive effect only for developed nations not for developing nations which highlights this fact that consistency is the most required ingredient in case of economic development overall. Overall findings of the study helps in concluding that in case of developing countries, economic reforms are proving to be more fruitful and swift in their outcomes than political reforms

Re-assessing political, social and economic determinants of economic growth: An analysis from selected Asian developing economies / Saima Sarwar and Noor ul Haq.

This study aimed to reassess the impact of different political, social and economic determinants of the economic growth in selected Asian developing economies. The variables which are being used in this regard are gross domestic product, government spending, democracy, economic freedom, foreign direct investment, primary education, labour participation and life expectancy at birth. According to the estimated results from fixed effect model, it has been found that political factors are affecting more to the economic performance of these nations as compared to the other dimensions i.e. social and economic determinants. Both sizes of bureaucracy and democracy are positively related with economic growth supporting ‘Webrian theory’ of bureaucracy. Moreover, when discussing each variable, findings shed light on this fact that in these nations except corruption, FDI, Trade openness, economic freedom, life expectancy, primary education and employment rate are positively related with GDP

Impact of Foreign Direct Investment on Employment Level In Pakistan: A Time Series Analysis

The early 19th century and 20th century is marked by a salient feature of close association between the economic progress and political freedom. This close association led to the phenomenon of globalization. Poor countries seek help from the rich countries and they too help them because, they also get benefit. Foreign direct investment play a key role in economic progress and this has a direct impact on employment level in any economy. This study focuses the impact of foreign direct investment on employment level in Pakistan. Data time span is 1970-2011. The variables in the study are employment level, foreign direct investment, exchange rate and GDP per capita. The study uses Johanson Co-integration approach to analyze the long run relationship between the dependent and independent variables. The result shows the existence of long run relationship. Keywords: Employment, Investment, Multinational firms, Time Serie