A Re-look at the Long-Run Stability of the Money Multiplier in India

Results on long-run stability of M1 and M3 money multipliers in India are presented after the BoP crisis. Allowing for in-sample regime switching it is found that M3 money multiplier can be characterized by a one-time regime shift around the beginning of 1997, the time when money markets reform first begun in a big way, with issuance of ad hoc 14-day on tap T-Bills giving way to Ways and Means Advances. Results on the stability of M1 multiplier are less clear and relationship, if it exists, is statistically weak. Although evidence from CUSUM-SQ tests and recent (more powerful) unit root tests suggests that M1 and adjusted monetary base are cointegrated.

Fan Charts as Useful ‘Maps’ for an Inflation-Targeting Central Bank: An Illustration of the Sveriges Riksbank’s Method for Presenting Density Forecasts of Inflation

In this study I illustrate the usefulness of Fan Charts for a central bank and show how they can be used to present its viewpoint on likely paths of future inflation. Exploiting a bivariate unobserved components model, I use the methodology followed by Blix and Sellin (1998) to demonstrate how subjective judgements can be systematically incorporated into model-based forecasts and effectively presented in a graphic manner.

Estimating Output Gap for the Indian Economy: Comparing Results from Unobserved-Components Models and the Hodrick-Prescott Filter

Output gap estimates are constructed for India using unobserved components model (UCM) approach on the lines of Watson (1986) and Kuttner (1994). Results from UCMs are not found to be any less sensitive to data revisions when compared to those from the Hodrick-Prescott filter. This, however, could be because of lack of sufficient ‘revised-data’ on which the sensitivity of the results can be tested. Based on standard deviation of change in potential output to data revisions and its ‘economic’ content, the UCM using trimmed mean as the numeraire for inflation comes forth as the best choice. Alternative estimates of “core” inflation, included as a state variable in one of the UCMs, are also provided

Operationalising Taylor-type Rules for the Indian Economy: Issues and Some Results (1992Q3 2001Q4)

This study is an attempt to formulate a monetary policy reaction function for India. In particular I model backward and forward looking Taylor and McCallum rules for the period post BoP crisis. It is found that backward-looking McCallum rule tracks the evolution of monetary base over the sample period reasonably well, suggesting that RBI acts as if it is targeting nominal income when conducting monetary policy. Recent declaration by the RBI that reserve money is its operating target (Annual Reports, 2001-02 and 2002-03) lends support to the findings of the study.

Regional update

Employment - Texas

Sources of India's economic growth: trends in total factor productivity

Indian Economy, Total Factor Productivity, and Economic Growth

Unit Root Tests: Results from some recent tests applied to select Indian macroeconomic variables

Results from newly developed unit roots tests of ERS (1996), PN (1996), NP (2001) and LM (1994) are compared against their traditional counterparts (ADF, PP and KPSS) on select Indian macroeconomic data. Results from ERS, PN and NP are broadly in agreement. However, using the general to specific criterion of Hall (1994) and the Modified Information Criterion (MIC) of NP for lag length selection, it is found that different lag length can lead to different results. Furthermore, results from using these criteria are also sensitive to the maximum lag length. Both KPSS and its modified version, LM, are found to be prohibitively sensitive to the lag length used. Since as of now no theoretical criterion exists for lag length selection for tests which test the null of stationarity, their use should be avoided, even for the purpose of so-called ‘confirmation’. Another important finding is that frequency of the data and span covered by the sample size plays an important role and whenever feasible, tests must be conducted with as many different frequencies as the availability of data permits. It is not only a large sample size that is important, but also the span covered, an issue raised long ago by Campbell and Perron (1991).

Chief executive pay in UK higher education: the role of university performance

open accessRemuneration for chief executives in UK higher education—known as Vice Chancellors (VCs)—has been on an upward trend in recent years, and VCs have received criticism that their performance does not warrant such reward. We investigate the relationship between VC pay and performance (rooted in principal agent theory), taking into account an array of other possible determinants. Deriving measures of VC performance is difficult as VCs are agents for various principals, and each principal may be interested in a different aspect of performance. We consider three measures of VC performance here: managerial efficiency as measured by data envelopment analysis; performance in university rankings produced by the media; the financial stability of the university. We construct a comprehensive data set, covering academic years 2009/2010 to 2016/2017, a period of considerable change in the UK higher education sector including rapidly-rising undergraduate tuition fees. Our results show that, once other possible determinants of VC pay are taken into account, the main measure of performance which affects VC pay is the one based on media rankings. Thus the agents (VCs) appear to be rewarded for delivering against this performance benchmark which is likely to be of interest to a variety of principals. This result however varies by type of university suggesting that the labour market for VCs differs by mission group