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Economic Growth and Its Determinants in Pakistan
Get PDFEconomically developed countries have been able to reduce
their poverty level, strengthen their social and political institutions,
improve their quality of life, preserve natural environments and achieve
political stability [Barro (1996); Easterly (1999); Dollar and Kraay
(2002a); Fajnzylber, Lederman, et al. (2002)]. After the World War II,
most of the countries adopted aggressive economic policies to improve
the growth rate of real gross domestic product (GDP). The neoclassical
growth models imply that during the evolution between steady states;
technology, exogenous rate of savings, population growth and technical
progress generate higher growth levels [Solow (1956)]. Endogenous growth
model developed by Romer (1986) and Lucas (1988) argue that permanent
increase in growth rate depends on the assumption of constant and
increasing returns to capital.1 Similarly, Barro and Lee (1994)
investigate the empirical association between human capital and economic
growth. They seem to support endogenous growth model by Romer (1990)
that highlight the role of human capital in economic activity. Fischer
(1993) argues that long-term growth is negatively linked with inflation
and positively correlated with better fiscal performance and factual
foreign exchange markets. In the context of developing countries,
investment both in capital and human capital, labour force, ability to
adapt technological changes, open trade polices and low inflation are
necessary for economic growth
Private Power Generation—Opportunities and Challenges
Get PDFPOWER INDUSTRY DYNAMICS The concept of modern world is
imperfect without electricity. The development of modern gadgets in past
two decades has made human living as reflection of a science fiction
movie. The fiction like living’s axis in fact is electricity and without
electricity every thing comes to a grinding halt. Though this picture is
portrait of the developed world, yet everyone would agree that wherever
electricity has reached, it has transformed everything into power
reliant. Whether it is Pakistan or any third world country, the
industry; the commerce; the banking system; the methods of teaching in
educational institutions; hospitals; control systems of civil aviation
and civic traffic systems; and the domestic living, everything revolves
around electricity. Whenever there is any break in electricity supply,
output of every segment of society drops down to its lowest ebb. Many
segments such as process industry and hospitals require highly reliable
power supply systems. Truly, electricity is no more a luxury available
to rich only; it has now become a basic need. However, scientists have
not yet fully succeed in overcoming the challenges posed by the dynamics
of electricity. First of all their failure to store electricity on
commercial scale has made it necessary to keep generating electricity
all the time. However, managing the generation quantum to meet the
varying intra-day and inter-day power demand at places which are
hundreds of miles apart require dedicated and sophisticated transmission
and distribution infrastructure. The problem accentuated in countries
like Pakistan where the generation capacity reduces in winter due to
lower availability of its hydro power plants and lower availability of
gas for thermal generation plants. The transmission cum distribution
infrastructure as well as installation cum operations of power
generating plants is very capital intensive. Hence it is very difficult
for the governments and / or power utilities to develop the generation
capacity and the transmission cum distribution network all by
itself
Pass-through of Change in Policy Interest Rate to Market Rates
Get PDFMonetary policy has been aggressively used by the central Bank
of Pakistan, in this decade, first to bolster growth and then to contain
rampant inflation. Despite the sufficiently tight monetary policy that
has remained in vogue in recent times, the inflation is still around 20
percent. This has raised questions about the effectiveness of monetary
policy. One possible reason for the lesser effectiveness, if not
failure, of monetary policy in taming inflation could be that in recent
times, inflation was primarily supply driven and that the monetary
tightening was in part offset by fiscal expansion, on the back of heavy
bank borrowing by the government. However one cannot rule out the
possibility that market imperfections might have also impeded the
effectiveness of monetary policy in taming inflation to the desired
extent. Incomplete and slow pass through of changes in policy interest
rate to deposit rate and lending rate is a kind of imperfection that
constrains the effectiveness of monetary policy. This study examines the
pass through of policy interest rate to different market rates. Monetary
theory predicts that the change in policy interest rate influences the
cost capital which in turn influences consumption, savings, investments,
and hence output. However if the impact of the change in policy rate on
the cost of capital is less than one for one or if the change in policy
rate fails to influence the cost capital immediately then the impact on
output would become visible only with a certain lag and the impact would
be less than one for one. This implies that if for example only 70
percent of the change in policy rate is passed on to cost of capital,
then to manage an increase of 100 basis points in cost capital the
policy rate should be raised by 143 basis points. This example serves to
emphasise that for effective monetary management knowledge of the
magnitude of passthrough of policy rate and the lag structure with which
the policy rate influences cost of capital is important. Substantive
empirical evidence confirms that changes in policy interest rate are
transmitted to the output with a certain lag and that the pass-through
of changes in policy rate to output or to other elements of the
transmission channel may be less than one for one. Given the policy
implications of the information, on the magnitude of pass through and
the lag structure with which the policy rate influences different market
rates, this Paper seeks to measure the pass-through of the changes in
six month Treasury bill rate to six month KIBOR, six month weighted
average deposit rate and weighted average lending rate. The study is
focused on Pakistan
Economic Growth and Income Inequality Relationship: Role of Credit Market Imperfection
Get PDFThe 20th century has witnessed unequalled success in improving
the living standard of people in most part of the world. According to
World Bank annual Statistical reports, poverty has declined
significantly in developing countries over the past twenty years but the
progress has been uneven. The number of people living in poverty fell
from 1.5 billion in 1981 to 1.1 billion in 2001. However, many
low-income developing countries are still trapped in vicious circle of
poverty. In Sub-Saharan Africa, the number of poor rose from 41 percent
to 46 percent between 1981 to 2001.While in Eastern Europe and Central
Asia, the numbers of poor people have risen to around 20 percent in
2001.1 Therefore; reduction of widely scattered poverty is the most
challenging goal for low income developing countries. Economic growth is
considered to be a powerful force for reducing poverty. High and
sustained economic growth increases the labor demand and wages which in
return will reduce poverty. Similarly, better earnings as a result of
reduction in poverty lead to increase productivity and growth. But the
extent of poverty reduction as a result of economic growth depends on
how the distribution of income changes with economic growth and on
initial Inequalities in income. If income inequality increases, then
economic growth does not lead to a significant poverty reduction. Many
developing countries achieved high growth rates in different periods but
poverty does not reduce significantly in these periods due to increase
in income inequalities. Most South and East Asian economies grew at
higher per capita rates since early 1970 along with rise in income
inequality over time. In contrast, Latin American countries grew by less
than the half of average growth rates in South and East Asia while
maintaining high income inequality.2 The differences in income
inequality at a given rate of growth require that efforts to reduce
poverty by stimulating growth are not sufficient and need to be
complemented by efforts to reduce income inequalities
Instinctive Behaviour, Producer Surplus, and Corporate Social Responsibility
Get PDFIn a broader sense, CSR became an issue mainly in the recent
years. The evolution of this phenomenon is largely to be credited to the
neoliberalist era that began in the last quarter of the 20th century and
continues to dominate the new millennium. Not surprisingly, the
conceptual and operational definitions of CSR are subject to as many
controversies and disappointments as is the outcome of neoliberalist
economics manifested in looming threats to social, economic and
environmental sustainability. The scope of this study is, however, only
limited to addressing the issue of CSR. The analysis is carried out by
adopting an inductive approach while probing into both interconnected
aspects and disconnected separate currents of the phenomenon. The
interconnectivity of CSR relates the capitalist paradigm with the
individual/collective human behaviour. The disconnection on the other
hand refers to specific real world issues with local and global contexts
involving simultaneous but unequal capitalist development in the North
and the South. The paper is divided into three parts. Part 1 reflects on
the relationship between instinctive and ethical behaviour of the
entrepreneurs. The former is driven by the motivational force of
self-interest exhibited in efforts to accumulate producer surplus, while
the latter demands social responsibility under the influence of
intrinsic and/or extrinsic regulations. Part II presents a brief review
of the literature on CSR, largely relating to the corporate sector in
the North. Finally, Part III of the paper analyses the literature on CSR
in the developing countries and highlights its recent origins in a world
where Technical Barriers to Trade (TBTs) are increasingly underscoring
the North-South divide in gains from economic globalisation
S. A. OŜga. The Rate of Exchange and the Terms of Trade. New Brunswick, New Jersey / London: Aldine Transaction, 2008. 116 pages. Paperback. Price not given.
Get PDFS. A. OŜga aims to provide a concise outline of the theory
behind the rate of exchange and the terms of trade, in textbook fashion
at an elementary level. The terms of trade are defined as the ratio of
the money prices of imports and exports, while the balance of trade is
the ratio of the value of exports to imports. The analysis in the book,
as pointed out by the author, is limited in several ways. First, it does
not go beyond defining and exploring relations between limited concepts,
and does not touch upon ways of testing or proving any concepts.
Secondly, the book deals with only the theory of ratios of exchange as
they pertain to international trade. Yet, the discussion in the book is
quite focused, which makes it easy to follow
Dimensions of Well-being and the Millennium Development Goals
Get PDFThe concept of well-being has deep roots in philosophy
[Cantril (1965)]. Much later in the 19th century modern definitions of
well-being emerged. The utilitarian movement defined well-being
subjectively and proclaimed individuals’ well-being as an important goal
of individuals’ behaviour and public policy. During the 20th century
social scientists started to examine well-being empirically, but a
unified concept of wellbeing was lacking. At the beginning of the 20th
century, economists developed elaborate quantitative theories of
well-being, but rejected the possibility that individuals’ could provide
valid reports of their own well-being. In the second half of the 20th
century social scientists started to develop subjective measures of
well-being, and started to examine how these measures relate to
demographic variables or other characteristics of individuals [Andrews
and Withey (1976)]. The relationship between GDP and well-being likely
depends on how rich a country is. As income increases it contributes
little to overall well-being at low levels of GDP in poor country, since
only a narrow segment of the population is benefiting directly.
Moreover, as noted by Sen (2001) non-monetary benefits such as health
and education that improve individual capabilities are often more
important than income in poor countries. As the benefits of continued
growth trickle down to a burgeoning middle class, social well-being
rises dramatically [Torras (2008)]. It is in this context that a number
of alternatives to GDP have been introduced. For example, the United
Nations Development Programme’s (UNDP) human development index (HDI)
uses GDP per capita to measure “access to economic resources” in
well-being assessments but accords it only one-third weight in
determination of the level of human development. Although national
income accounting measures may sometimes not agree with popular
perceptions of trends in economic well-being, GDP per capita is one of
the three main components of the HDI, whose objective is to indicate the
capability of people “to lead a long and healthy life, to acquire
knowledge and to have access to resources needed for a decent standard
of living” [Osberg and Andrew (2005)]
Mumtaz Anwar. The Political Economy of Foreign Aid to Pakistan. HWWA Studies. Volume 79. Hamburg: Hamburg Institute of International Economics. 2006. 141 pages. Paperback. Price not given.
Get PDFForeign aid has played a significant role in Pakistan’s
economic development. In the 1950s and 1960s it was aid that helped
propel the high rates of growth of the economy. Again in the 1980s and
the early 21st century, aid has supported the high levels of growth in
the economy. Many books and articles have looked at the role of aid in a
narrow economic perspective, but the present volume looks at aid in a
political economy framework. The time-period covered is 1960-2002, and
both bilateral as well as multilateral aid flows are included in the
analysis. Seven chapters makeup the book, along with a number of tables
at the end which throw light on the author’s analysis. The theoretical
framework followed is one that examines both the donor’s and the
recipient’s need for aid. The objectives and the needs of both do not
always match. Chapters 3, 5, and 6 form the crux of the book. Chapter 3
discusses and examines the politico-economic factors that are
responsible for the allocation of aid.......
Determination of Credit Programme Participation and Socioeconomic Characteristics of Beneficiaries: Evidence from Sargodha
Get PDFInternational literature asserts that “micro-finance” began
alleviating poverty several decades ago when organisation in Latin
America, Bangladesh, and other developing nations started testing the
notions of lending small amounts to impoverished people (mostly women).
Professor Mohammad Younis1 of Bangladesh and his Grameen Bank brought it
on to the world stage and showed how effectively it could be used to
change lives. Giving loans of as little as five dollars, Grameen brought
millions in to the micro credit net and in doing so lifted people,
particularly the rural poor, out of abject poverty [Ayesha (2007)]. By
1980, the success of such institutions prompted many NGO’s and
International Organisations to provide micro-finance
services
