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Drivers of Entrepreneurship: Linking With Economic Growth and Employment Generation (A Panel Data Analysis)
Get PDFThe need for entrepreneurs for economic development has always
been crucial in history because they are the leaders who invent
innovative ideas that give spark to economic activities. They are
responsible for the combination of factors of production by capital
formation, creating employment opportunities, wealth distribution that
facilitates development and growth. A well explained definition of
entrepreneurship in the words of Wennekers and Thurik (1999) that
successfully makes the functional roles of entrepreneurs is: “…the
manifest ability and willingness of individuals, on their own, in teams
within and outside existing organisations, to perceive and create new
economic opportunities (new products, new production methods, new
organisational schemes and new product-market combinations) and to
introduce their ideas in the market, in the face of uncertainty and
other obstacles, by making decisions on location, form and the use of
resources and institutions.” (46–47) High and sustained economic growth
is the fundamental objective of every developed or developing country’s
governmental policy. Economic growth is a long term expansion of the
productive potential of the economy. It generates employment in the
economy and raises the living standards of the nation. Economic growth
promotes business activities in private sector, increases company
profits and enhances investor confidence
Determinants of Export Performance in the Wake of the Global Financial Crisis: Evidence from South Asia
Get PDFThe idea that trade is important for economic growth dates
back to the nineteenth century when classical economists like Adam
Smith, Ricardo, John Stuart Mill etc. advocated the favourable effects
of international trade on output. Since then a rich body of both
theoretical and empirical literature has evolved with regards to exports
and trade policy. Within this overall literature, two competing
approaches that can be broadly identified are Import Substitution
industrialisation (IS) and Export-Led (EL) growth. According to the EL
growth hypothesis, exports can promote economic growth through three
main channels that are as follows: (i) trade enables firms (at the micro
level) and countries (at the macro level) to gain through specialisation
and economies of scale. The most efficient producers witness increasing
market shares, that in turn lead to aggregate productivity gains through
a reallocation of resources [Taylor (1981) and Melitz (2003)], (ii)
Exports are an important source of foreign exchange. These resources are
important not just for the purchase of vital inputs such as capital and
machinery but are extremely valuable where balance of payments
constraints are widespread [Faridi (2012)]. (iii) Trade is an important
source of knowledge and technological transfers. New growth theory has
shown that trade with technologically innovative countries allows access
to the technological know-how of trading partners, and also has the
potential of encouraging innovative activity by increasing the returns
to innovate as traders have access to a larger market relative to
non-trading firms
Clean Development Mechanism (CDM) Business in Pakistan: Perceptions and Realities
Get PDFClimate change is the biggest challenge human family has ever
faced in world history. It has local as well as global impacts and
almost all the ethnic groups, communities, and geographical locations
are exposed to it [Stern (2006)]. But comparatively developing countries
are more exposed to the changes which are taking places due to climate
[Stern (2006) and Barker (2008)]. The degree of their exposure which has
a number of determinants varies across different regions [Karen, et al.
(2004)]. Climate experts so far have proposed two broader solutions for
this problem; mitigation of climate change by reducing the amount of
emitted carbon from atmosphere, and adaptation to climate changes
[Tompkins and Adger (2005) and Becken (2005)]. Kyoto Protocol of the
United Nations Framework Convention on Climate Change (UNFCCC) is
dealing with climate change mitigation. It is the milestone towards
global carbon mitigation efforts [Miriam, et al. (2007)]. This protocol
has resulted in the establishment of carbon markets by adopting the
Clean Development Mechanism (CDM). Pakistan ratified the Kyoto Protocol
in 1997 and implemented it in 2005. To ensure the smooth functioning of
carbon trading business in Pakistan, CDM related infrastructure was
developed. Mainly this includes the establishment of CDM Cell in
Pakistan, but a number of private consultancies also came into being
with the emergence of this mechanism
The Role of Fiscal Policy in Human Development: The Pakistan’s Perspective
Get PDFHuman development considered as the engine of the economic
growth as it improves the economy’s strength and increases the standard
of living of the people, increases the choices and maximises the welfare
of the society that is the prime objective of any government. The
development of the human capabilities is also necessary for the
sustainable growth, as there are many channels through which human
development foster the economic growth. It increases the labour
productivity, labour demand, employment and output. On the other hand,
human capital also attracts physical capital.1 Empirically, it is very
difficult to have an exact measure of human development and social
welfare. Several proxies used to measure human development, e.g. GNI per
capita as a measure of standard of living, Purchasing Power Parity (PPP)
criterion to measure the cost of living and to measure the welfare,
average year of schooling, school enrolment rate and health expenditures
as a percentage of GDP to capture this composite welfare and development
indicator. A fair index of Human Development Index (HDI) was developed
by United Nations Development Programme in 1990. This index based on the
standard of living (natural logarithm of GDP PPP per capita), access to
knowledge (adult literacy rate with two-third weighting and the
remaining is the gross enrolment ratio) and a healthy life (life
expectancy at birth). The value of index varies from 0 to 1, lower the
HDI, lesser would be the human development and welfare in the country or
vice versa
Momentum Effect: Empirical Evidence from Karachi Stock Exchange
Get PDFCapital market efficiency and the prediction of future stock
prices are the most thought-provoking and ferociously debated areas in
finance. The followers of traditional financial theory strongly believe
that the markets are efficient in pricing the financial instruments.
This view became popular after Fama’s work on the Efficient Market
Hypothesis. But before 1990s, wide-ranging financial literature
documented that stock prices, to some extent, are predictable. Many
psychologists, economist and the journalists are of the view that
general tendency of individuals is to overreact to the information. De
Bondt and Thaler (1985) studies this view of experimental psychology
that whether such behaviour matters at the market level or not. They
found out that stock prices will overreact to information, and suggested
that contrarian strategies buy the past losers and sell the past
winners, earn abnormal returns. They extended the holding period from 3
to 5 years and provide the evidence of long term returns reversal.
Jegadeesh (1990) and Lehmann (1990) supported the evidence of return
reversal in short term, i.e. from one week to one month. They suggested
that the contrarian strategies having holding period of one week to one
month earned the significant abnormal return. Lo and Mac Kinalay (1990)
objected on the ground that a major portion of this abnormal return,
reported by Jegadeesh (1990) and Lehmann (1990), is due to the delayed
reaction of stock prices to common factors rather than to overreaction.
Some other researchers pointed out some other reasons of this abnormal
stock returns i.e. short-term pressure on stock prices and absence of
liquidity in the market rather than overreaction
Effects of Input Composition on Technical Efficiencies of Textile Industries in Pakistan
Get PDFThis paper studies the technical efficiencies of the textile
manufacturing industries in Pakistan using 5-digit level industry data.
Technical efficiencies are computed by the Data Envelopment Analysis
technique assuming constant as well as variable returns to scale. The
efficiency scores thus obtained are analysed by the TOBIT regression
technique to determine how input composition influences these efficiency
scores. It is found that imported raw material and machinery exercises a
positive effect, whereas non-industrial costs affect technical
efficiencies in a negative way. Electricity does not play its due role
in affecting technical efficiencies. JEL Classification: C24, D24, L6,
O14 Keywords: Technical Efficiency, Data Envelopment Analysis, TOBIT
Analysis, Manufacturing Industrie
Determinants of Intra-Industry Trade between Pakistan and Selected SAARC Countries
Get PDFThis paper analyses country-specific and industry-specific
determinants of intra-industry trade (IIT) between Pakistan and other
SAARC countries using panel data techniques. This paper also
disentangles total IIT into horizontal and vertical IIT. The Vertical
IIT is further divided into high-quality and low quality IIT. This paper
finds that country-specific variables are more important in explaining
the IIT relative to industry-specific variables. The decomposition of
IIT shows that in the SAARC region Pakistan’s IIT is mostly comprised of
the vertical IIT. The share of horizontal IIT is comparatively less. The
paper offers specific policy recommendations for the promotion of IIT in
the SAARC region. JEL classification: F12, F14, F15 Keywords: IIT,
Horizontal IIT, Vertical II
Macroeconomic Policies and Business Cycle: The Role of Institutions in Selected SAARC Countries
Get PDFFiscal and monetary policies are used to smooth the cyclical
fluctuations in output. There is ample evidence that developed countries
use counter cyclical policies in principle for this purpose [Gali and
Perotti (2002); Sack and Wieland (2007)]. Indeed, OECD and other
developed countries use loose monetary and fiscal policies to tackle
with financial crisis of 2007 [IMF (2008)]. However situation is reverse
in developing countries, they are using the pro-cyclical policies to
stabilise business cycle fluctuations that results in higher output
volatility [Hausmann and Stein (1996); and Kaminsky, Reinhart, and Vegh
(2004)]. Theoretically, there are several factors such as limited excess
to credit, poor governance and institutions1 that are responsible for
conduct of pro-cyclical policies in developing countries, of which
institutional framework is important. A poor institution is a key factor
that is responsible for the conduct of pro-cyclical policies in emerging
market economies. Countries, where institutions are strong, conduct
contractionary policies in boom and expansionary policies in recession
while countries with poor level of institutions contract the policies in
recession and expand in boom [Acemoglu, Johnson, Robinson, and
Thaicharoen (2003); Calderon and Schmidt-Hebbel (2008)]. Countries with
weak institutions show the strong negative relation between output and
interest rate while countries with strong institutions have positive
link between output and interest rate [Duncan (2012)]. That’s why
developing countries are pursuing tight monetary policy in recession and
loose policy in boom, although little empirical literature is available
on this issue [Lane (2003)]. Fiscal policies are pro-cyclical in the
countries, where political system is subject to multiple fiscal veto
points that results in higher output fluctuation [Stein, et al. (1999);
Braun (2001)]. Indeed, rent-seeking government conducts pro-cyclical
policies
Can Common Stocks Provide Hedge against Inflation? Evidence from SAARC Countries
Get PDFThe theory says that if stocks provide an effective hedge
against inflation then the effect of expected inflation should be
compensated in the form of nominal stock return. As Fisher Hypothesis
(1930) concluded that nominal expected return on a security is a
function of expected inflation rate as well as expected real interest
rate. Bodie (1976) worked on Fisher Hypothesis and found that actual
nominal return depends on expected and unexpected inflation rates and
also it depends on expected and unexpected nominal returns. According to
Geske and Roll (1983) a positive relationship exists between stock
returns and inflation, based on the assumption that securities represent
claims on real assets. When there is an increase in rate of inflation,
it is expected that prices of real assets will also rise, thereby
improving the value of securities representing a claim on such real
assets. We found that various studies in this area reported against the
hypothesis, showing a negative relationship between the two. However,
certain other studies support the theory asserting that the relationship
existing between stock returns and inflation is positive. While the
negative relationship between inflation and stock return is against the
theory, negative results have led to formation of hypothesis such as tax
augmented hypothesis. The tax augmented hypothesis states that when we
deduct tax from the stock returns, their relationship with inflation
tends to get negative as the quantum and rate of taxes also rise along
with inflation. This hypothesis also opines that initial researcher did
not consider the tax impact when they were empirically testing the
relationship between stock returns and inflation