334 research outputs found
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Firm dollar debt and central bank dollar reserves: Empirical evidence from Latin America
No full textI explore an empirically robust but previously undocumented association between the foreign exchange reserves accumulated by central banks of emerging market economies and dollar-denominated debt held in the balance sheets of non financial sector firms. Borrowing in dollars can have damaging effects on corporate balance sheets in the event of exchange rate depreciation. However, firms may discount
such risk because of the implicit insurance provided by the central banks ex-ante reserve accumulation: in the event of a currency depreciation, firms may expect the central bank to stabilize the exchange rate using its stock of reserves. Using a novel firm-level balance sheet database, I investigate this possibility for close to 1500 firms in six of the largest Latin American economies, Argentina, Brazil, Chile, Colombia, Mexico and Peru. Results suggest that over the sample period, 1995-2007, an increase in the
level of reserves is statistically and economically associated with an increase in the dollar borrowing of non financial sector firms of these economies. This could hint at a possible paradox: a higher level of reserves need not necessarily signify an economy that is more resilient to shocks. While reserve accumulation enables governments to weather macroeconomic risks arising from sudden stops in international capital flows, it can also increase the vulnerability of the corporate sector to currency risks by distorting incentives. Thus central banks, while formulating their foreign exchange intervention
policies, may need to take into consideration the impact of the resultant reserve stockpiling on the private sector
Why tax effort falls short of capacity in Indian States: A Stochastic frontier approach
No full textTaxation is an important tool to enhance the economic development and to finance the expenditure responsibilities of a government. This paper attempts to measure the tax capacity and tax effort of 14 major Indian states from 1992-92 to 2010-11 using Stochastic Frontier Analysis. The use of tax capacity frontier helps to identify those states which are operating near their tax capacity and states which are away from tax frontier. The results indicate presence of large variation in tax effort index across states
and which seems to be increasing over time. Econometric analysis suggests that economic and structural variables have significant impact on the tax capacity. While per-capita gross state domestic product has positive effect on states' own tax revenue, relative size of agriculture sector of a state has adverse effect on its own tax revenue. The evidence on tax efficiency suggests that the higher inter-governmental transfers tend to reduce tax efficiency. Outstanding liabilities and expenditure on debt repayment also indicate adverse effect on tax efficiency, but the adverse effect of the latter is lesser
than the former. Enactment of Fiscal Responsibility and Budget Management Act seems to have improved the tax efficiency which has been further strengthened by the better law and order inside states. Higher political competition inside a state, represented by effective number of parties, has favourable effect on the tax efficiency of a state. Implications are drawn for policy
Linkages between parental education, utilization of health care facilities and health status of children: Evidence from India
No full textIn this paper we identify the multiple channels by which parental education affects child
health status. These can be summarised as follows: (a) parental education directly improves child health status; (b) amongst all those who utilised institutional health care facilities children of educated parents have a better health status; (c) educated mothers are more likely to utilise institutional health care whether or not such facilities are available within their village; and (d) educated parents are more likely to utilise health care centre that is available in a village, compared to uneducated parents. Our results show that merely expanding the supply of health care facilities will not help to increase the pace of reduction in child mortality rates and improve child health status. Utilization of existing health care services too should expand and here women’s education plays a positive role. Hence, the government has to pay attention to increase education level of adults, women in particular, along with the expansion of health care coverage
External shocks
No full textAfter the global financial crisis, India was exposed to many external shocks from commodity prices and foreign capital flows. Although capital flow fluctuations were largely due to global risk-on risk-off factors, a widening current account deficit (CAD) contributed to India's vulnerability to external shocks. The major source of shocks was external, but policy mistakes increased India's vulnerability. These included inadequate attention to sectoral bottlenecks that reduced export growth and domestic financial
savings, while substitution away from expensive oil imports was discouraged. Dependence on foreign capital, to finance the CAD, rose while degrees of freedom from continuing capital controls were underutilized to reduce exchange rate volatility and to smooth interest rates. Steep depreciations combined with volatility did not help exporters. Evaluation of measures to stabilize the exchange rate establishes that temporarily taking oil marketing companies demand out of the market was the most
effective, since small demand-supply mismatches lead to large currency movements in thin markets. Prudential measures such as increasing position limits, margin requirements are to be preferred to a ban on a market or a transaction-type. If market restrictions become necessary, they should be carefully targeted. Accumulation and use of reserves, use of market information and of signalling can all help implement managed floating. Such an exchange rate regime can contribute to effective inflation
targeting without the policy rate rising to reduce depreciation as in the classic interest rate defense
Employment guarantee for women in India evidence on participation and rationing in the MGNREGA from the National sample survey
No full textThe Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which guarantees employment of every rural household for 100 days, has different progressive provisions which incentivise higher participation of women in the programme. Official data suggest that 47% of all MGNREGA workers are women. This paper uses the National Sample Survey for the 68th employment-unemployment round (2011-12) to examine the performance of states in terms of participation and rationing of women in the programme relative to that of men. In addition, it documents these indicators from various sub-populations of women, including widows, mothers of young children, etc. who typically face serious constraints in the context of labour market participation.The study finds substantial variations both across states and sub populations implying the
need for a differentiated policy focus across states to support women's access to and participation in the MGNREGA
Measures, spatial profile and determinants of dietary diversity: Evidence from India
No full textFood security policies in developing countries generally focus on calorie intake, which is not sufficient to tackle the triple burden of malnutrition: undernourishment, micronutrient deficiencies and over-nutrition. Consumption of a diverse diet is important to lessen the burden and is constrained by different factors. This paper using nationally representative dataset from India, analyzes the determinants of dietary diversity, which is measured using the Entropy Index. Heterogeneous dietary diversity profile across adjoining regions highlights the persistence of uneven development in terms of
consumption and health indicators. Quantile regression analysis is used to identify the impact of determinants at different parts of the intake distribution. We find that level of consumption expenditure, quality adjusted prices of food items, educational attainment and information dissemination are important factors that affect the household's consumption of a diverse diet. As one moves away from towns dietary diversity improves. Large size landholders need not necessarily consume a diverse diet as
expected. Suitable policy interventions are identified
Impact of public spending on health and education of children in India: A Panel data simultaneous equation model
No full textThe basic objective of the study is to examine the impact of public expenditure on health and education after incorporating the linkages between health status of children and their educational achievements in India. This study has developed a simultaneous equation model among health and education of children, and public expenditure on these sectors. Three stage least squares technique is applied to get consistent and efficient estimates of the system. The results show that bad health status among children, captured by high IMR, is responsible to have lower enrollment rates and high dropout rates in primary level. In addition, public expenditure on Supplementary Nutritional Program has indirect positive impact on education through the improvements in health status of children whereas additional expenditure on elementary education has positive impact on enrollment rates, but at diminishing rate. Moreover, public expenditure on elementary education has greater impact on enrollment as compared to dropout rates
Impediments to contract enforcement in day labour markets: A Perspective from India
No full textIn developing countries, lack of formal contract enforcement mechanisms is compensated by informal or relational governance enforced through trust, kinship, reputation, etc. This paper focuses on one such setting in India's urban informal economy: the 'day labour' market for casual labour. We survey seven such markets in Navi Mumbai (a city on the outskirts of Mumbai), and find considerable incidence of
contract enforcement problems in the form of employers reneging on wage payments to labourers. We find that payments to labourers with access to social networks and a record of work done are less likely to be reneged. Further, consistent with the literature on the limits of relation-based contract enforcement, we find that labourers in large markets, with greater linguistic and caste-based diversity, are more likely to be reneged. We argue that interventions aimed at facilitating access to formal mechanisms might help overcome some of the limitations with relation-based enforcement
Income related inequality in financial inclusion and role of banks: Evidence on financial exclusion in India
No full textThis paper analyzes income related inequality in financial inclusion in India using a
representative household level survey data, linked to State-level factors. It shows that (a) the
extent of financial exclusion is quite severe among households across all income groups, (b)
income related inequality in financial inclusion varies widely across sub-national regions in
India, but it is quite high in most of the cases, (c) income related inequality in financial
inclusion cannot be considered as synonymous to income inequality. A notable result is that
greater availability of banking services fosters financial inclusion, particularly among the
poor. This paper also provides estimates of the effects of various socio, economic and
demographic characteristics of households on propensity of a household to use formal
financial services, and compare that for rural and urban sectors
Political strongholds and budget allocation for developmental expenditure: Evidence from Indian states, 1971-2005
No full textThis paper examines the effects of political factors on allocation of revenue budget for developmental
expenditure by the sub-national governments, using data from 15 major states in India during the
period 1971-2005. It measures the ruling party’s political stronghold on the basis of constituency level
electoral outcomes and shows that greater stronghold of the ruling party in a state leads to
significantly higher proportion of revenue budget allocated for developmental expenditure. It also
shows that voters’ turnout and political regime change have positive and significant effect on
proportion of revenue budget allocated for developmental expenditure. However, political ideology,
within government fragmentation, disproportionality in representation, and effective number of political
parties do not have any significant impact on budget allocation decisions of the Indian state
governments. Results of this paper also indicate that greater reliance on market forces reduces the
share of developmental expenditure. These are new and robust results