Economics Research International
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Open Access journal
ISSN (Print) 2090-2123 - ISSN (Online) 2090-2131
Published by Hindawi [333 journals]
- Cournot and Bertrand Competition in the Software Industry
Abstract: In a software industry based on a platform firm and two firms producing differentiated applications complementary to the platform, we investigate the effects on profits and welfare of the choice of different contracts (price versus quantity) by the application firms. In contrast to the traditional result, equilibrium profits are higher under Cournot or Bertrand competition depending upon the degree of complementarity between platform and application producers as well as the degree of substitutability between applications; the social welfare may be higher under Cournot when the application products are highly substitutable.
PubDate: Mon, 27 Feb 2017 07:40:34 +000
- Public Debt and External Reserve: The Nigerian Experience
Abstract: Nigeria is confronted with the issue of limited capital and has to resort to foreign debt in order to augment domestic savings, balance of payment deficits, and shortfall in revenue which induce continuous raise in the debt stock at an alarming rate. In the light of this, this study assesses the impact of public debt on external reserve in Nigeria. The objectives of this study include the assessment of the trends and relationship between public debt and external reserve in Nigeria, using the Johansen cointegration and FMOLS technique on the secondary data from 1981 to 2013. The result revealed that public debt has a positive and significant effect on external reserve stock in the long run suggesting that the nation’s debt crisis can be attributed to both exogenous and endogenous factors such as the nature of the economy, economic policies, high dependence on oil, and swindling foreign exchange receipt. This study recommends that the federal government should employ more superior method to negotiate for fixed interest payment and varying amortization schemes, as well as seek multiyear rescheduling rather than year by year basis.
PubDate: Sun, 16 Oct 2016 13:55:01 +000
- What Causes Stock Market Volatility in Pakistan? Evidence from the
Abstract: We examined the presence of volatility at the Karachi Stock Exchange (recently changed the name to Pakistan Stock Exchange) (KSE) by fitting Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) model to 25 years’ index data. We found that the ARCH effects are present in the data indicating the stock market cluster volatility during the period under study. We found persistent high volatility in the stock market and presence of negative leverage effect. Moreover, we tried to identify the factors causing stock market volatility by collecting and analyzing the primary data obtained from 246 individual investors of stock market and 28 brokers listed with KSE. Our results show that investors consider political situation as the most important factor causing turbulence in the stock market. Interviews with the brokers also confirmed this. The second most important factor identified by investors is the herd behavior among investors that results in over- and underpricing of stocks and the overall market shows a volatile behavior. Our findings suggest that individual investor’s behavioral dimensions of involvement, risk attitude, and overconfidence are significantly associated with factors causing market volatility.
PubDate: Sun, 28 Aug 2016 11:52:58 +000
- Economic Assessment of Producing Corn and Cellulosic Ethanol Mandate on
Agricultural Producers and Consumers in the United States
Abstract: Strong support for the biofuels program in the USA is expected to influence dedicated biomass crops production. Their production is expected to compete for resources with traditional crops and in turn influence commodity prices, economic surplus, and trade balance. Implications of dedicated biomass crop as bioenergy feedstock, alternative energy policies, and government initiatives on agricultural producers and consumers are evaluated using a national quantitative model, AGSIM. Economic impacts include effect on cropping patterns, crop prices, fertilizer prices, consumer and producer surplus, and trade balance. Economic analyses based on alternative assumptions related to marginal lands currently in conservation use returning to crop production as well as biomass crop yields are conducted. Results indicate that present biofuel policies are associated with large costs to consumers in terms of increased commodity prices and negative trade balance. Increase in net farm income is offset by decrease in consumer surplus. The results represent a robust set of economic impacts, which suggests policy makers to consider the unexpected economic consequences of bioenergy policy and warrants consideration of multiple alternative energy sources to achieve a sustainable energy goal.
PubDate: Sun, 28 Feb 2016 16:26:14 +000
- Do Scarce Precious Metals Equate to Safe Harbor Investments? The Case
of Platinum and Palladium
Abstract: This research establishes the predictability and safe harbor properties of two scarce precious metals, namely, platinum and palladium. Utilizing their spot prices, the study concludes intermediate memory in the return structures of both precious metals, which implies the instability of platinum and palladium returns’ persistency in the long run. However, both the ARFIMA-FIGARCH and the ARFIMA-FIAPARCH models confirm long-memory properties in the volatility of the two spot prices. The leverage effects phenomenon is not also present based on the ARFIMA-APARCH and ARFIMA-FIAPARCH models, which may possibly conclude the resilience of both precious metals against increased volatility. However, further tests proved that only platinum has a symmetric volatility response to shocks with the presence of negative gamma parameter, which proves that only platinum can be considered a safe harbor investment, because negative and positive shocks have equal effects on their returns and volatilities. Comparing the four models utilized in this study, the combined ARFIMA-FIAPARCH models are the best fitting model to characterize both precious metals’ spot prices.
PubDate: Sun, 10 Jan 2016 11:07:05 +000
- Assessing Swaziland’s Fiscal Sustainability and Policy Options
Abstract: In 2011, Swaziland’s fiscal policy was extensively scrutinized following its worst fiscal crisis in decades. The impacts of fiscal adjustment on Swaziland’s growth, inflation, and sectoral allocations of resources were some of the issues analyzed. The fall in the Southern African Customs Union revenue receipts to levels below the trend line, for two consecutive years, and the fiscal challenges that followed were the main motivation behind this interest. This paper attempts to establish whether fiscal sustainability was threatened, and if so what were the policy options? Based on the results from econometric estimations, using a sample for the 1986 to 2012 period, I show that the country’s fiscal sustainability was not threatened. However, calculations of the tax gap and the primary gap covering the period 2000 to 2016 reveal that fiscal sustainability was threatened. Subject to the major drivers of government expenditure and revenue handles, it is concluded that, in the short run, the two needed to be realigned while also allocating more resources to support growth.
PubDate: Tue, 17 Nov 2015 10:49:54 +000
- Partial Cross-Ownership, Cost Asymmetries, and Welfare
Abstract: The present study analyses the effects on social welfare of the existence of cross-participation at ownership level in a Cournot duopoly. We show that cross-participation, although it lowers the degree of competition by reducing total output and consumer surplus, may increase social welfare, provided that (i) the firm owned by a single shareholder is less efficient than the other (cross-participated) firm and (ii) the size of the market is not too large. Therefore, the policy implication is that larger cross-participations at ownership level should be favoured, despite their anticompetitive nature, when the cross-participated firm is relatively more efficient and the extent of the market is not too large.
PubDate: Tue, 10 Nov 2015 09:01:33 +000
- On the Strategic Choice of Union-Oligopoly Bargaining Agenda: Further
Abstract: This paper revisits the strategic selection of the bargaining agenda in a unionized industry with potential entry and decentralized negotiations for different competition modes. The incumbent chooses Right-to-Manage (RTM) or Efficient Bargaining (EB) considering two scenarios: (1) the agenda is imposed to the (potential) entrant (committed bargaining) and (2) the entrant can flexibly choose the agenda (flexible bargaining). In the mixed duopoly, the timing of the game is as follows: at stage 1, the EB firm bargains over wage and employment with its union, while the RTM firm bargains over the wage; at stage 2, the RTM firm chooses employment. This paper shows that the strategic selection of the agenda strongly depends on the interaction between the degree of market competition, the union’s power, and the convergence or divergence between parties on the agenda’s choice. This complex interaction leads to a very rich set of equilibrium outcomes, including multiple and even (as regards the union’s preferences on the agenda) asymmetric equilibria. Compared with alternative timings in the literature, this specification leads to substantial differences with flexible bargaining: EB emerges as equilibrium in Nash strategies for a noticeably increased set of cases.
PubDate: Tue, 29 Sep 2015 09:55:46 +000
- Econometric Modelling of the Variations of Norway’s Export Trade across
Continents and over Time: The Two-Stage Non-Full Rank Hierarchical Linear
Econometric Model Approach
Abstract: This paper applies the two-stage hierarchical non-full rank linear econometric model to make a deep analysis based on revenue generated from key Norwegian export items over the world’s continents. The model’s ability to analyse the variation of Norway’s export trade gives us the following interesting details: (1) for each continent intra- and intervariation of export items, (2) access to deep knowledge about the characteristics of the Norway’s export items revenue, (3) quantifying the economic importance and sustainability of export items within continents; and finally (4) comparing a given export item economic importance across continents. The results suggest the following important policy implications for Norway. First, Europe is the most important trade partner for Norway. In fact, 81.5% of Norwegian export items are transported to Europe. Second, there is a structural shift in Norwegian exports from North and Central America to Asia and Oceania. Third, the new importance of Asia and Oceania is also emphasized by the 85% increase in export revenues over the period 1988–2012. The trade pattern has changed and trade policy must change accordingly. The analysis has shown that in 2012 there are two important export continents for Norway: Europe and Asia and Oceania.
PubDate: Tue, 01 Sep 2015 06:52:44 +000
- An Extension of the Hawkins and Simon Condition Characterizing Viable
Abstract: This paper discusses an extended version of the Hawkins and Simon condition which constitutes a synthetic formulation of the mathematical properties that viable economies must satisfy in single production models. The new version is implicit in the economic interpretations offered by them of the Hawkins and Simon condition, once a correction is introduced in one of those interpretations. Moreover, the paper details the meaning of the extended version following the interpretation of the original version proposed by Dorfman, Samuelson, and Solow. It also introduces a characteristic property of indecomposable matrices that has not previously been published.
PubDate: Mon, 31 Aug 2015 11:40:48 +000
- Nonexistence of Harberger-Laursen-Metzler Effect with Endogenous Time
Preference in an Imperfect Capital Market
Abstract: This paper investigates the spending and current-account effects of a permanent terms-of-trade change in a dynamic small open economy facing an imperfect world capital market, where the households’ subjective discount rate is a function of savings. Under the assumption that the bond holdings are measured in terms of home goods, it is shown that when the discount rate is a decreasing function of savings, there does not necessarily exist a stable state; however, when the discount rate is an increasing function of savings, a saddle-path stable steady state comes into existence and the Harberger-Laursen-Metzler effect does not exist unambiguously; that is, an unanticipated permanent terms-of-trade deterioration leads to a cut in aggregate expenditure and a current-account surplus. The short-run effects obtained by the technique by Judd (1985, 1987) and Zou (1997) are consistent with the results from the long-run analysis and diagrammatic analysis.
PubDate: Wed, 15 Jul 2015 06:56:32 +000
- Monopoly Profit Maximization: Success and Economic Principles
Abstract: This paper presents a classroom experiment on pricing strategies available to monopolists. Each student makes production decisions as a monopolist during the experiment, learning from his/her own experiences what it means to be a price searcher. Full information is provided on cost conditions, while the demand function remains unknown to the participants. Given a sufficient number of periods, students will in principle be able to maximise their profits by applying a simple trial and error strategy. However, one of the objectives of the experiment is to demonstrate to students that search strategies based on economic principles are more efficient.
PubDate: Sun, 19 Apr 2015 09:57:02 +000
- The Effect of Quality Tracing System on Safety of Agricultural Product
Abstract: Frequent occurrence of food safety incidents in recent years has made analyzing safety of agricultural product in view of contract theory become academic research focus. Based on incentive theory, in this paper we establish a static game under the condition of asymmetric information and analyze how the “company + farmer” contract is influenced by a complete quality tracing system composed of ex-ante inspection and ex-post traceability. Meanwhile, we find out that a complete quality tracing system can increase the safety level of agricultural product and that ex-ante inspection and ex-post traceability can replace each other in the process. Finally, we put forward policy suggestion for the policy-maker to solve the problem of food safety.
PubDate: Mon, 16 Feb 2015 13:49:41 +000
- In Search of Leading Indicator Property of Yield Spread for India: An
Approach Based on Quantile and Wavelet Regression
Abstract: The leading indicator ability of yield spread for future output growth and inflation is tested for India. Using the yields on securities with maturities ten years and three months to construct yield spread, we study the predictive power of yield spread for output growth and inflation. Our results based on regression of future inflation and output on yield spreads indicate that there is no information in the yield spread about future economic activity and inflation in India. Further, the predictive power of yield spread is analyzed over different quantiles of inflation and output growth using quantile regression; we find that there is again no evidence of predictive information in the yield spreads. Using multiscale wavelet based regression, predictive power is however unveiled at higher time scales for output growth only.
PubDate: Tue, 06 Jan 2015 14:06:31 +000
- Real National Income Average Growth Rate: A Novel Economic Growth and
Social Fair Evaluation Index
Abstract: The purpose of this study is to propose a new economic index, namely, real national income average growth rate (RNIAGR), which measures the performance of economic growth with consideration for income distribution. This study also develops another new economic index, called five-scale real national income average growth rate (FSRNIAGR), which simplifies the calculation of RNIAGR. The merits of these new indexes are discussed to justify their efficacy. This paper also justifies the use of proposed index by showing that this index can actually measure the ordering of social welfare. To highlight the difference between this new index and the traditional ones, this paper compares the index with real economic growth rate using the data of Taiwan. In addition, this paper shows that when the real growth stagnates or even declines, this new index indicates that income distribution deteriorates.
PubDate: Thu, 01 Jan 2015 09:44:08 +000
- Technical Efficiency and Technical Change in Canadian Manufacturing
Abstract: This study applies the “true fixed effects” panel stochastic frontier methodology to the Canadian KLEMS data set to estimate technical change and technical efficiency in the Canadian manufacturing sector. To account for the endogeneity of capital inputs as well as the possible problems related to omitted variables, a two-stage residual inclusion method is pursued. The first stage is estimated using the dynamic panel GMM method. The results show that Canadian manufacturing industries experienced significant declines in technical efficiencies during the last ten years. This suggests that the observed slowdown in TFP growth during the recent past is partly due to declining technical efficiency.
PubDate: Wed, 31 Dec 2014 10:45:43 +000
- The Effect of Monetary Policy on Commodity Prices: Disentangling the
Evidence for Individual Prices
Abstract: We study the effect of monetary policy shocks on commodity prices. While most of the literature has found that expansionary shocks have a positive effect on aggregate price indices, we study the effect on individual prices of a sample of four commodities. This set of commodity prices is essential to understand the dynamics of the balance of payments in Colombia. The analysis is based on structural VAR models; we identify monetary policy shocks following Kim (1999, 2003) upon quarterly data for commodity prices and their fundamentals for the period from 1980q1 to 2010q3. Our results show that commodity prices overshoot their long run equilibrium in response to a contractionary shock in the US monetary policy and, in contrast with literature, the response of the individual prices considered is stronger than what has been found in aggregate indices. Additionally, it is found that the monetary policy explains a substantial share of the fluctuations in prices.
PubDate: Wed, 24 Dec 2014 09:44:58 +000
- A Complex Dynamical Analysis of the Indian Stock Market
Abstract: This paper seeks to analyze the dynamical structure of the Indian stock market by considering two major Indian stock market indices, namely, BSE Sensex and CNX Nifty. The recurrence quantification analysis (RQA) is applied on the daily closing data of the two series during the period from January 2, 2002, to October 10, 2013. A Rolling Window of 100 and step size 21 are applied in order to see how both the series behave over time. The analysis based on three RQA measures, namely, % determinism (DET), laminarity (LAM), and trapping time (TT), provides conclusive evidence that the Indian equity market is chaotic in nature. Evidences for phase transition in the Indian equity market around the time of financial crisis are also found.
PubDate: Sun, 14 Dec 2014 12:04:48 +000
- An Empirical Analysis of Unpaid Leave in Taiwan
Abstract: This paper investigates the factors influencing unpaid leave or furlough in Taiwan. The data used is from the First Social Image Survey in 2009, which focused on work situation, cross-strait relations, interpersonal trust, institutional trust, and other related issues. The sample ages are from 19 to 89. The method used is probit modelling for examining the influences on unpaid leave. The main empirical results find that older workers, people with highest educational attainment, widows and widowers, middle class workers, and workers living in eastern areas are less likely to take unpaid leave from the labour market. In particular, male Mainlander workers are more likely to take unpaid leave. Moreover, female workers with highest educational attainment, widowed, and of middle class are less likely to take unpaid leave. Finally, workers with high earnings are less likely to take unpaid leave, but female workers with high family income and female workers who are divorced or separated have a higher probability of unpaid leave.
PubDate: Wed, 12 Nov 2014 00:00:00 +000
- Investigating the Existence of Chaos in Inflation Data in relation to
Chaotic Foreign Exchange Rate
Abstract: Foreign exchange (ForEx) rates are amongst the most important economic indices in the international monetary markets. ForEx rate represents the value of one currency in another and it fluctuates over time. It is related to indicators like inflation, interest rate, gross domestic product, and so forth. In a series of works, we investigated and confirmed the chaotic property of ForEx rates by finding positive largest Lyapunov exponent (LLE). As inflation influences ForEx, in this work we would like to address the specific question, Is inflation data also chaotic? We collected data for time period of 2000 to 2013 and tested for nonlinearity in data by surrogate method. Calculating LLE, we find existence of chaos in inflation data for some countries.
PubDate: Tue, 21 Oct 2014 07:48:01 +000
- Analysis of Economic Efficiency and Farm Size: A Case Study of Wheat
Farmers in Nakuru District, Kenya
Abstract: The primary objective of this study is to examine the effect of farm size on economic efficiency among wheat producers and to suggest ways to improve wheat production in the country. Specifically, the study attempts to estimate the levels of technical, allocative, and economic efficiencies among the sampled 130 large and small scale wheat producers in Nakuru District. The social-economic factors that influence economic efficiency in wheat production have also been determined. Results indicate that the mean technical, allocative, and economic efficiency indices of small scale wheat farmers are 85%, 96%, and 84%, respectively. The corresponding figures for the large scale farmers are 91%, 94%, and 88%, respectively. The number of years of school a farmer has had in formal education, distance to extension advice, and the size of the farm have strong influence on the efficiency levels. The relatively high levels of technical efficiency among the small scale farmers defy the notion that wheat can only be efficiently produced by the large scale farmers.
PubDate: Thu, 16 Oct 2014 11:36:15 +000
- Working the Night Shift: The Impact of Compensating Wages and Local
Economic Conditions on Shift Choice
Abstract: The theory of compensating differentials asserts that night shift workers should receive compensating wage differentials due to undesirable work conditions. In weak local economies, workers may have difficulty finding jobs; thus, these workers might be more likely to accept night shift work and be less concerned with the size of the compensating differential for night shifts. Using CPS data from 2001, this paper employs maximum likelihood estimation of an endogenous switching regression model to analyze wages of day and night shift workers and shift choice. The findings indicate the presence of selection bias, thus emphasizing the importance of correcting for self-selection into night shifts. The average of the estimated wage differentials for night shift work is negative for the overall sample, with differentials varying by worker characteristics. The shift differential is found to be a statistically significant predictor of shift choice, indicating that shift premiums play an important role in motivating individuals to select night shift work. Using two measures of local economic conditions and a new method of analyzing interaction effects in the context of an endogenous switching regression model, this paper finds limited evidence that weak local economic conditions lessen the impact of compensating differentials on shift choice.
PubDate: Thu, 09 Oct 2014 10:22:05 +000
- Effect of Physician Gender on Demand for Pap Tests
Abstract: People’s demand for preventive medical care is one type of investment in health. The aim of this paper is to examine women’s demand for secondary prevention in Taiwan, focusing on the role a physician’s gender plays in women’s inclination to undergo Pap tests. Our estimation results show that regional ratio of female doctors has a positive and significant effect on utilization of Pap tests for the full sample and for women aged below 30. In addition, doctor’s gender matters only in utilization of Pap tests not in other types of preventive healthcare services in Taiwan. We suggest that the government may consider liberalizing medical laws to make it legal for trained female nurses or nurse practitioners to perform Pap tests in order to encourage the utilization of Pap tests, especially in rural and mountain areas. The government may also consider subsidizing the use of cervical cancer vaccines to help females prevent cervical cancer.
PubDate: Thu, 18 Sep 2014 07:09:57 +000
- Public Investments, Human Capital, and Political Stability: The Triptych
of Economic Success
Abstract: This study assesses the effects of fiscal policy on economic growth in a sample of 96 countries from 1990 to 2010. Ordinary Least Squares (OLS) and Extreme Bound Analysis are mainly estimated in order to investigate whether public investments, human capital, and political stability affect growth controlling for initial output and human capital levels. Furthermore, in this empirical research four subsets of independent variables were used: (a) demographic factors, (b) political determinants, (c) region variables, and (d) variables regarding macroeconomic policy. Empirical results suggest that there is an important difference in the impact of public and private sector investments on the growth of per capita income. Moreover, political indicators such as corruption control, rule of law, and government effectiveness have a high impact on economic growth. Demographic factors, including fertility rate and mortality growth, as well as several macroeconomic variables, like inflation rate index and government consumption, were estimated to be statistically significant factors of economic performance. Fiscal volatility may also be a new possible channel of macroeconomic instability that leads to lower growth. Policy implications of the findings are discussed in detail.
PubDate: Tue, 09 Sep 2014 08:39:56 +000
- Exchange Rates and Monetary Fundamentals: What Do We Learn from Linear and
Abstract: This paper revisits the association between exchange rates and monetary fundamentals with the focus on both linear and nonlinear approaches. With the monthly data of Euro/US dollar and Japanese yen/US dollar, our linear analysis demonstrates the monetary model is a long-run description of exchange rate movements, and our nonlinear modelling suggests the error correction model describes the short-run adjustment of deviations of exchange rates, and monetary fundamentals are capable of explaining exchange rate dynamics under an unrestricted framework.
PubDate: Tue, 09 Sep 2014 05:14:30 +000
- Phillips and Wage Curves: Empirical Evidence from Bosnia and Herzegovina
Abstract: This study is an empirical examination of the existence and characteristics of the Phillips curve and the wage curve in Bosnia and Herzegovina. The findings indicate that there is no evidence of the existence of the short-term Phillips curve. Instead, the data suggests that in the short-term an increase in inflation leads to an increase in unemployment. The estimated wage curves indicate that only increases in real payment increase employment. The conclusion of this study is that increases in inflation might have a negative short-term impact on the level of employment in Bosnia and Herzegovina.
PubDate: Sun, 31 Aug 2014 10:42:58 +000
- Rural Credit and Farms Efficiency: Modelling Farmers Credit Allocation
Decisions, Evidences from Benin
Abstract: This paper analyses farmers’ credit allocation behaviors and their effects on technical efficiency. Data were collected from 476 farmers using the multistage sampling procedure. The stochastic frontier truncated-normal with conditional mean model is used to assess allocation schemes effects on technical efficiency. Tobit model reveals the impact of farmers’ sociodemographic characteristics on efficiency scores. Results reveal that farm revenue (about 2,262,566 Fcfa on average) is positively correlated with land acreage, quantity of labour, and costs of fertilizers and insecticides. Farmers’ behaviors respond to six schemes which are categorized in two allocations contexts: out-farm and in-farm allocations. The model shows that only scheme (e) positively impacts technical efficiency. This scheme refers to the decision to invest credit to purchase better quality of pesticides, herbicides, fertilizers, and so forth. The positive effect of the scheme (c) may be significant under conditions of farmers’ education level improvement. Then, scheme (e) is a better investment for all farmers, but effect of credit allocation to buy agricultural materials is positive only for educated farmers. Efficiency scores are reduced by household size and gender of the household head. Therefore a household with more than 10 members and a woman as head is likely to not be technically efficient.
PubDate: Thu, 28 Aug 2014 09:43:11 +000
- Are Eurozone Fixed Income Markets Integrated? An Analysis Based on Wavelet
Multiple Correlation and Cross Correlation
Abstract: This paper investigates the synchronization of fixed income markets within Eurozone countries using the new wavelet based methodology. Conventional wavelet methods that use multivariate set of variables to calculate pairwise correlation and cross correlation lead to spurious correlation due to possible relationships with other variables, amplification of type-1 errors, and results, in the form of large set of erroneous graphs. Given these disadvantages of conventional wavelet based pairwise correlation and cross-correlation method, we avoid these limitations by using wavelet multiple correlation and multiple cross correlations to analyze the relationships in Eurozone fixed income markets. Our results based on this methodology indicate that Eurozone fixed income markets are highly integrated and this integration grows with timescales, and hence there is almost no scope for independent monetary policy and bond diversification in these countries.
PubDate: Thu, 28 Aug 2014 00:00:00 +000
- The Effect of Exchange Rate Movements on Trade Balance: A Chronological
Abstract: This paper evaluates the current state of the literature concerning the effects of exchange rate movements on trade balance. Thus, this paper is a review article and provides a survey of the alternative theories that focus on the effect of exchange rate changes on the trade balance. It systemizes the literature into four distinct reviews and approaches following the chronological order. The paper presents the (a) Standard Theory of International Trade, (b) Elasticity Approach, (c) Keynesian Absorption Approach, and (d) Monetary Approach. The study shows that higher attention should be given for the most plausible dynamic theory in this field, known as the J-Curve.
PubDate: Sun, 24 Aug 2014 09:45:18 +000
- The Effectiveness and Sustainability of the Sterilization Policy in China
Abstract: The aim of this paper is to examine the sterilization policy in China. First, several indices are used to measure the status of China’s markets and to determine effectiveness and sustainability of the sterilization policy and the possible impacts it may have induced. Second, within a microeconomic framework, we incorporate the housing price variable into the target loss function of the monetary authority to explore its financial capabilities and evaluate the effectiveness and sustainability of China’s sterilization policy. The empirical results show that Chinese monetary authorities sterilize almost all of the effects of international capital inflows and increase foreign exchange reserves on the monetary base. That is, increased capital mobility does not sabotage the independence of the Chinese monetary policy. Nevertheless, analyses of the sustainability of sterilization policy indicate that the sustainability of the monetary sterilization policy has been seriously challenged since March 2008, which suggests that Chinese monetary authority has endured tremendous pressure for unsustainable sterilization.
PubDate: Wed, 20 Aug 2014 07:15:13 +000