ELG hypothesis is valid for India: An Evidence from Structural Causality

Causality is important for empirical analysis in economics but not easily detected. Therefore, it is always important that one should investigate the problem not only on statistical grounds but also add extra statistical information which may come from economic events happening over a time about the problem under study. This extra statistical information helps in introducing asymmetry in the relationship. Most of the studies are based on Granger Causality for determining causal direction between export and economic growth for individual countries. In this paper we use a method suggested by Hoover (2001) for detecting causality which incorporates extra statistical information, economic theory and statistical analysis. We apply this technique to a simulated data and also apply it to the export-led growth hypothesis for India. Our results indicate that there is unidirectional causality from export to economic growth.Structural Causality, Conditional and Marginal probability distributions, Granger Causality, Export Led Economic Growth

Measuring Food Security for Pakistan Using 2007-08 HIES Data

Food is one of the most basic rights of every one living on this earth to get food. Food insecurity has very serious consequences in term of undermining people’s health, productivity and even their very survival. Sufficient food policy should not distract us from the need to find ways to address hunger. In this study we have calculated food security indicators related to food access and utilization by using Household Integrated Economic Survey(HIES) 2007-08 data. Almost 25% of the population is suffering from high food insecurity and 40% population is suffering from medium level of food insecurity. Cereals comprise more than 50% of the calories consumed by all income groups. Better educated household heads have lower food insecurity level than less educated after controlling income effect. Household size and food security are negatively related. Sind province has the highest percentage of food insecure population while in absolute number Punjab has the highest number of food insecure people.Availability, Accessibility, Utilization, Food Security Indicators

Determination of stochastic vs. deterministic trend in quarterly GDP of Pakistan

Many economic and financial time series show evidence of trending behavior or non stationarity in the mean. An important econometric goal is determining the most proper form of the trend in the data. The transformations of series depend on whether the series is trend stationary or difference stationary. In this paper, study is conducted to declare the nature of trend component in quarterly GDP of Pakistan whether it is trend stationary or difference stationary. It is necessary to know, because trend stationary and difference stationary models imply very different short run and long run dynamics. We have explored the type of trend in GDP series by ADF unit root test and also support our arguments by empirical distribution instead of asymptotical ones i.e., bootstrapping test. The purpose of the paper is not only to investigate the type of trend in the series by conventional methods but also to motivate small distribution theory like bootstrapping techniques that can helps ones in selection of advocate model for observed series.Bootstrapping, Stationarity, Pivotal statistic, Unit root

Simulation Evidence on Granger Causality in Presence of a Confounding Variable

This paper provides simulation evidence on Granger causality between two variables when they are jointly caused by a third variable. Four Data Generating Processes (DGPs) are considered for testing causality by Granger method and two DGPs for testing causality by Toda and Yamamoto (1995) procedure. Our simulation involve three variables but causality has been tested only between two variable and the third variable (the real cause) has been ignored to show that its association which matters in these causality tests. Nevertheless, if we know that there are only two variables in economic dynamics and the true model is known then these causality tests work fine and for this we have carried out bootstrap simulation.Granger Causality, Toda and Yamamoto Procedure, Monte Carlo Simulation, Causation and Association, Bootstrap Simulation

Working to Improve Price Indices Development in Pakistan

Given the importance of Consumer Price Index (CPI), there has been long debate on its measurement issues. It is the best and most well-known indicator of inflation, which is further used for evaluating the monetary and fiscal policy of a country. Other uses of CPI for indexation are social security benefits, rents, contractual payments, taxation, deflating national income accounts, purchasing power parity index, inflation incidence for different income groups of population, impact of inflation on demographic composition of the population. Any measurement error in CPI may overstate or understate inflation that will have serious repercussions for monetary, fiscal and other economic policies. The report of the Boskin Commission [Boskin, et al. (1996)] has identified possible sources of bias in the CPI like substitution bias, outlet bias, quality bias, new product bias. In this paper we have tried to evaluate these biases and to start a debate on improving Consumer Price Index (CPI) construction in Pakistan. We found that there are biases of Commodity Substitution Bias, Outlet Substitution Bias, Quality Adjustment Bias, Index Calculation Bias and New Product Bias. Other limitations for the CPI index including; Issue of selecting a representative product (or good), Defining issue of average quality, Data collection, weights determination and Base year change were also found.Consumer Price Index, Biases in CPI, CPI Formulae

Working to Improve Price Indices Development in Pakistan

Given the importance of Consumer Price Index (CPI), there has been long debate on its measurement issues. It is the best and most well-known indicator of inflation, which is further used for evaluating the monetary and fiscal policy of a country. Other uses of CPI for indexation are social security benefits, rents, contractual payments, taxation, deflating national income accounts, purchasing power parity index, inflation incidence for different income groups of population, impact of inflation on demographic composition of the population. Any measurement error in CPI may overstate or understate inflation that will have serious repercussions for monetary, fiscal and other economic policies. The report of the Boskin Commission [Boskin, et al. (1996)] has identified possible sources of bias in the CPI like substitution bias, outlet bias, quality bias, new product bias. In this paper we have tried to evaluate these biases and to start a debate on improving Consumer Price Index (CPI) construction in Pakistan. We found that there are biases of Commodity Substitution Bias, Outlet Substitution Bias, Quality Adjustment Bias, Index Calculation Bias and New Product Bias. Other limitations for the CPI index including; Issue of selecting a representative product (or good), Defining issue of average quality, Data collection, weights determination and Base year change were also found.Consumer Price Index, Biases in CPI, CPI Formulae

Causal order between money, income and price through graph theoretic approach for Pakistan

We investigate the causal relationship between money, income and price for Pakistan using quarterly data from 1971-2003. We find that both money supply and prices cause income thus verifying the monetarists' point of view. Taking account of time series properties the methodology applies recent developments in graph theoretical causal search algorithms developed by Pearl, Glymour, Spirtes(1993) and Pearl(2000). One main merit of graph theoretic approach is that it overcomes problems of over identification in VAR models, Choleski decomposition on the other hand can only be applied for just an arbitrarily identified VAR models.Causality, Choleski Decomposition, Structural VAR, Graph theoretic models

Evaluation of Test Statistics for Detection of Outliers and Shifts

Existence of outliers and structural breaks having mutually unknown nature, in time series data, offer challenges to data analysts in model identification, estimation and validation. Detection of these outliers has been an important area of research in time series since long. To analyze the impact of these structural breaks and outliers on model identification, estimation and their inferential analysis, we use two data generating processes: MA(1) and ARMA(1,1). The performance of the test statistics for detecting additive outlier(AO), innovative outlier(IO), level shift(LS) and transient change(TC) is investigated using simulation strategy through power of a test, empirical level of significance, empirical critical values, misspecification frequencies and sampling distribution of estimators for the two models. The empirical critical values are found higher than the theoretical cut-off points, empirical power of the test statistics is not satisfactory for small sample size, large cut-off points and large model coefficient. We have explored confusion between LS, AO, TC and IO at different critical values(c) by varying sample size. We have also collected empirical evidence from time series data for Pakistan using 3-stage iterative procedure to detect multiple outliers and structural breaks. We find that neglecting shocks lead to wrong identification, biased estimation and excess kurtosis. JEL Classification Codes: C15, C18, C63, C32, C87, C51, C52, C82 AMS Classification Codes: 62, 65, 91, DI, 62-08, 62J20, 00A72, 91-08, 91-10, 91-11 62P20, 91B82, 91B84, 62M07, 62M09, 62M10, 62M15, 62M2

Iran-Pakistan-India Gas Pipeline—An Economic Analysis in a Game Theoretic Framework

Over the last four decades world economy has experienced several wide swings in energy prices. These swings have very serious repercussions for countries of Asian, in general, and South Asian regions, in particular; the latter having tremendous economic potential. Rapidly growing economies like India, China and Pakistan will face serious energy crisis if they do not plan well for future needs. Energy is one of the most critical inputs to several variety of production function. And we have very limited ability to replace it by other means in the short run, without having serious setback to our GDP. Energy conservation is a topic that has been discussed over a long period of time. Energy conservation is not a local issue but a global one, affecting the strategic planning and policy making of the governments worldwide. Energy conservation is proving as a catalyst for globalisation and international trade of energy