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The Determinants of Services Sector Growth: A Comparative Analysis of Selected Developed and Developing Economies
Full text linkThis study empirically examines the possible factors that
determine the services sector growth, both in selected developed and
developing economies. For estimation purpose, the study employs the
static as well as the dynamic panel data estimation technique with panel
data over the period 1990-2014. The results suggest that GDP per capita,
FDI net inflow, trade openness and innovations are the common factors
that significantly affect the services sector growth both in developed
and in developing economies. However, the productivity gap is the only
factor that does not have any significant impact on services sector
growth, both in developed and developing economies, which indicates that
the Baumol's cost disease has been cured. Keywords: Services Sector
Growth, Panel Data Analysis, Innovation
Impact of Project and Programme Aid on Economic Growth: A Cross Country Analysis
Full text linkThis study examines the impact of foreign aid instruments,
namely Project Aid and Programme Aid, on economic growth of 27
aid-receiving countries. The study constructs a system of three
equations, i.e. growth, investment and human capital. Using the
Generalised Method of Moment estimation technique, the study concludes
that while Project Aid has a positive and significant impact on economic
growth, Programme Aid has an insignificant impact on economic growth.
Additionally, the study finds that economic policies do enhance
effectiveness of aid at aggregate level. Therefore, the capacity of
aid-recipient countries to effectively use their resources for economic
development needs due consideration. Keywords: Project Aid, Programme
Aid, Economic Growth, Conditionality, Procurement Reform, System
Equation Method, Generalised Method of Moment (GMM), Principal Component
Analysi
Forest Wood Consumption and Wood Shortage in Pakistan: Estimation and Projection through System Dynamics
Full text linkConsumption rates of major forest products such as timber and
firewood, place significant strain on wood stock and forest area in
Pakistan. With the country's rising population, the consumption of these
two major products is increasing because of the growing energy demand,
and no alternative products are likely to replace wood consumption in
the near future. We apply system dynamics modelling to an analysis of
the forestry sector in Pakistan for novel insights into the drivers and
future trajectories of wood consumption. The present research is based
on time series macroeconomic data from 1990-2010 and projections to 2040
of wood supply, forest area, population growth, wood extraction, wood
imports and different uses of wood in the country. The study reveals
that there is no significant increase in area under forest, while
consumption of firewood and timber has increased. The consumption of
firewood is greater than timber consumption in Pakistan, both in
percentage share and in total volume of wood consumption. The
sustainable supply of wood is less than wood consumption, and with
population growth this gap is increasing; wood supply from agricultural
lands is a viable option to fill the gap. Keywords: Wood Consumption,
Sustainable Wood Supply, Projected Wood Shortag
Contrarian and Momentum Investment Strategies in Pakistan Stock Exchange
Full text linkThis study examines several aspects of the momentum
strategies, such as profitability, risk-based explanation, and
decomposition of the momentum profits. For this purpose, we use weekly
and monthly data of 581 firms listed at the Pakistan Stock Exchange
(PSX) for the period 2004-2014. We found the presence of momentum
profits over short and long-horizons, while majority of the contrarian
profits were observed only in the presence of penny stocks that have
share prices of PKR 10 or less. As a robustness check, we computed
returns through the weighted relative strength scheme (WRSS) procedure
and average cumulative abnormal returns (ACARs). Interestingly, the
results reported through WRSS have shown a similar pattern to that
obtained through average cumulative abnormal returns (ACARs). Further,
to know which factor contributes more to momentum and contrarian
profits, we used the model proposed by Lo and MacKinlay (1990). Our
findings show that the overreaction effect is the largest contributing
factor of contrarian profits in PSX, while cross-sectional risk is the
second largest factor and negatively affects the contrarian profits.
Moreover, the lead-lag effect contributes positively to the contrarian
profits. Similarly, the largest contributing factor for momentum profits
is the underreaction effect, whereas cross-sectional risk is the second
largest factor that positively affects momentum profits. Unlike
contrarian profits, lead-lag effect reduces the momentum profits in the
PSX
Differing Impact of Liberalisation: The Case of Vertically Integrated Clothing Firms
Full text linkThis paper compares the productivity and other characteristics
of vertically integrated and non-integrated firms to investigate whether
efficiency gains associated with a given liberalisation episode vary
across firms, depending on their organisation. A theoretical setting of
vertical integration in the textile and clothing industry is developed,
to reveal that trade expansion triggers a change in the relative factor
cost of these two types of firms, and consequently, a change in product
range produced by them. The results are further backed by using a sample
of clothing firms in Pakistan for the years 1992-2010 to analyse the
effect of the phasing out of U.S. textile and clothing quotas on
firm-level efficiency. The empirical findings illustrate that an
increase in the level of quotas brings about a significant growth in the
mean productivity of vertically integrated clothing firms. The
diminishing efficiency of non-integrated firms points to the lack of
ability of these firms to benefit from tighter quality control, timely
revision of production policies and guarantee of supplies. JEL
Classification: F13, F14, D24, L23 Keywords: Trade Liberalisation,
Productivity, Vertical Integration, Firm Heterogeneity, Multi-Fibre
Arrangemen
Does Pak-Rupee Exchange Rate Respond to Monetary Fundamentals? A Structural Analysis
Full text linkThis study empirically examines the contribution of monetary
fundamentals in explaining nominal exchange rate movements in the case
of Pak-rupee vis-à-vis US-dollar over the period 1982Q2 to 2014Q2. The
empirical results support the existence of cointegration relationship
between nominal exchange rate and monetary fundamentals. The results
reveal that relative money stocks and real income are the key drivers of
exchange rate determination in Pakistan in the long-run. For dynamic
interaction, the Structural Vector Autoregressive (SVAR) method is
applied. Results from the SVAR show that the responses of exchange rate
to shocks, originated from money supply, income, interest rate and
inflation differentials, are consistent with the predictions of the
flexible-price variant of the monetary model of exchange rate in the
short-run. More specifically, the results indicate that inflation and
interest rate differential explain maximum variations in exchange rate
in the short-run. In essence, results suggest that monetary fundamentals
are the key drivers of exchange rate fluctuations in Pakistan,
especially in the short-run. JEL Classification: F31, F33, C32, F41
Keywords: Monetary Model, Exchange Rate, SVAR, Pakista
Paul Collier. The Future of Capitalism: Facing the New Anxieties. London, UK: Allen Lane. 2018. 256 pages. Price UK £ 20.00 (Hardback).
Full text linkThe Future of Capitalism by Paul Collier is an insightful
book. In this book the author has highlighted the things that are wrong
with capitalism. He has also highlighted not only the problems created
by capitalism but also the problems being faced by capitalism today. The
author has made a cogent case to show that deep economic rifts in the UK
and the USA are “tearing apart the fabric of our societies” (p. 3).
Collier has, in a nutshell, shown in the book how to save the capitalism
from itself. The book is different from the books written with either
the conservative or with the liberal perspective in that rather than
relying on mere rhetoric, Collier has tried to present pragmatic
solutions to the socioeconomic problems that are so rampant today. He
has argued that in these times when there are deep political divisions,
no new economic theory can work the magic. Instead he has made a case
for policies that are not only pragmatic but are communitarian in
nature. What is unique about the book is that ethics and moral
philosophy are at the centre stage of Collier’s narrative. George
Akerloff, a Nobel laureate in Economics, has termed the book as the most
revolutionary work since Keynes
Minhas Majeed Khan, et al. (eds.). China-Pakistan Economic Corridor—A Game Changer. Islamabad, Pakistan: Institute of Strategic Studies Islamabad (ISSI). 2016. iii+164 Pages. Pak Rupees 500.00 (Hardback).
Full text linkChina-Pakistan Economic Corridor—A Game Changer is a
collection of essays, written by experts in the fields of International
Relations, Political Economy, Current Affairs, and Sino-Pak relations.
The book takes its readers on an exuberant journey through the history
of Silk Route to the One Belt, One-Road (OBOR) initiative and the
political economy of the Sino-Pakistan relations. The book not only
underscores the challenges that lie ahead in making the China-Pakistan
Economic Corridor (CPEC) a success, but it also presents suggestions for
making it a real game changer for development and prosperity of
Pakistan, and the entire region. The book highlights the economic and
political importance of CPEC by integrating analysis with the latest
data. In the first article, Li Xiguang discusses the importance of the
OBOR initiative. He asserts that “opening to both the east and the
west”, China will become the centre of Central Asia. The idea of OBOR
raised by China would not only achieve economic purposes but cultural,
religious, and educational exchanges can also be made possible through
this project. Historically, Silk Road had its own influence and it
helped in shaping the governance and transportation of even the most
distant countries and influenced the culture of even the remotest areas.
In the past, the area around the CPEC has seen the ascent of the
cultural centres of the world. The CPEC, which encompasses countries
including Pakistan, Afghanistan, Tajikistan, Kyrgyzstan, Kazakhstan,
Turkmenistan, and Iran has once again put China on the central stage.
The author feels that China needs to maintain social relationships and
political cooperation with these nations. This initiative is shaping a
new world order through common destiny, common interests, values,
culture, and security
Pakistan’s Monetary Policy: Some Fundamental Issues
Full text linkOver the last three decades, the landmark transformation of
central banks from secrecy to openness and transparency has
significantly enhanced their performance to successfully anchor
inflation expectations and achieve price stability. The extent of such a
transformation of the State Bank of Pakistan (SBP), especially in terms
of statutory objectives, monetary policy mandate, conflicts of interest,
disclosures, and dissemination of effective public economic information
is assessed vis-à-vis the current popular central banking practices. The
assessment indicates that the SBP is yet to be transformed to be able to
achieve price stability which is a cornerstone for the achievement of
sustainable economic growth. On the statutory front, such a
transformation requires amending the SBP Act 1956, in line with the
statutes for the best monetary policy frameworks by; (1) making price
stability as the overriding objective of the SBP; (2) putting in place a
clear mechanism for its accountability against price stability,
consistent inflation targets, and; (3) elimination of the cushion for
government‘s involvement with the monetary policy decision making
processes. Some of the other areas like, institutional capacity building
of the SBP, in terms of the relevance and level of the academic
qualification, research profiles, and experiences of the Board, higher
as well as lower tier management need special attention. Such
transformations may not only enhance assimilation, creation, sharing,
and funnelling of existing as well as new knowledge into monetary policy
formulation, but may help change the static mindset at the SBP, hence
allowing the institution to flourish. JEL Classification: E5, E52, E58
Keywords: Statutory Objectives, Conflicts of Interest, Disclosures,
SB
Floor Brouwer (ed.) Sustaining Agriculture and the Rural Environment: Governance, Policy and Multifunctionality. Cheltenham, UK: Edward Elgar. 2004 (Reprinted 2016). Xi+360 pages. U.K. £98.10 (Hardback).
Full text linkThe edited book, “Sustaining Agriculture and the Rural
Environment”, is largely a European contribution to the Ecological
Economics. It provides a useful review of ‘multifunctionality’ as the
central attribute of the European Model of Agriculture (EMA) and its
applied value to other developing countries. Brouwer introduces the book
(in Chapter 1) with a premise that jointly with food and fibre, the
European farmers also produce ‘public goods’ such as landscapes and
biodiversity management, cultural heritage, and viable rural
communities. He warms up the reader to digest what follows in the book
with a quick overview of the market for these positive externalities and
strategies for their continuous supply in the European Union’s Common
Agriculture Policy. This paves the way for rest of the book, which is
organised into four parts and seventeen chapters