Suchergebnisse

Money, income, and prices are important macroeconomic
variables that play a crucial roles in an economy. The trends in money
supply, movements in prices, changes in nominal and real income, as well
as their interrelationships affect the economic life and well-being of a
nation. The compilation of data on these magnitudes over long periods of
time along with the supporting analysis is what constitutes monetary
history. The present book by P. R. Brahmananda has carried out such an
exercise for India. In presenting the monetary history of India, the
author has kept the pioneering work of Milton Friedman and Anna Shwartz
as a model for his work, and has comprehensively treated the 19th
century events and experiences of the then Indian Subcontinent in the
monetary and related areas. In the process, more than 200 time series of
different variables have been brought together. The book not only
contains a narrative account including the summary of the various
viewpoints before the currency committees, and a detailed chronology of
the period, but also examines the pros and cons of the various
controversies of that period. Moreover, it subjects the empirical
evidence to econometric testing of several important hypotheses of the
modern-day monetary theory.

This paper attempts to explore a seasonal pattern, the
Ramadhan effect, in the Pakistani equity market. Ramadhan, the holy
month of fasting, is expected to affect the behaviour of stock market in
Pakistan where the environment in Ramadhan is different from other
months as people devote more time to perform religious rituals and the
general economic activity slows down. The effects of Ramadhan on mean
return and stock returns volatility are examined by including a dummy
variable in regressions and GARCH models respectively. The analysis
indicates a significant decline in stock returns volatility in this
month although the mean return indicates no significant
change.

This paper examines the validity of the Random Walk Model in
the Pakistani equity market. The model, extensively tested in other
equity markets, implies that past movements in a stock price are not
helpful in predicting future prices of that stock. The model states that
changes in stock prices are serially independent and conform to some
probability distribution. Conventionally, the independence part is
examined through Serial Correlation Test, whereas the distributional
aspect is analysed through Frequency Distributions. Same techniques are
applied in this paper on daily closing prices of 36 individual stocks, 8
sector indices, and a market index from January 1, 1989 to December 30,
1993. The analysis indicates that the Random Walk Model is not valid in
the Pakistani equity market as is the case in other emerging markets.
The results show the presence of strong serial dependence in stock
returns and indicate the slow adjustment of the market to new
information. This points to the weaknesses of the market regarding the
dissemination of pertinent information to potential investors,
indicating that effective measures should be taken in this regard. The
shape of the distribution reveals that stock returns in the Pakistani
market, like in other equity markets, do not comply with the normal
distribution, implying that theoretical models must be used with
caution.

This paper empirically examines the effect of foreign capital
inflows on domestic price levels, monetary expansion, and the exchange
rate volatility for Pakistan using linear and nonlinear causality tests.
The key message emerging from the analysis is that there is a
significant inflationary impact of capital inflows, in particular during
the period of surges in capital inflows. Specifically, we find evidence
of a significant nonlinear Granger causality running from capital
inflows to the change in domestic prices. We also show that domestic
prices are nonlinearly caused (in Granger sense) by the growth of
domestic debt and money supply-to-GDP ratio. Our results, however,
suggest that the market interest rate and the nominal exchange rate do
not have significant relationships with domestic prices. The findings
suggest that there is a need to manage the capital inflows in such a way
that they should neither create an inflationary pressure in the economy
nor fuel the exchange rate volatility. JEL Classification: C22, C32,
F21, F31, F32 Keywords: Capital Inflows, Inflationary Pressures, the
Exchange Rate Volatility, Monetary Expansion, Nonlinear
Dynamics

Macroeconomics addresses output, employment and price
fluctuations during business cycles. Business cycles which capture
variation in economic activity emerge generally due to instable
investment, frequent changes in money and credit through banking system
and unmanageable haphazard proceedings of wars or political instability.
Business cycles inherent features of mixed economic system where
households and businesses composed of different motivations spend and
produce, differ in their respective economic activities. The occurrence
of this difference results in creation of waves in economic activities,
which are the business cycles [Spencer and Amos (1993)]. Output
variation in moderate context is either a recession or recovery. During
recession the economic activity falls which not only reduces employment
opportunities but creates gap between potential and actual output of an
economy. The federal government tries to keep the adverse effects of
business cycle at bay all together. Economists admit that private sector
is unable to protect the economy from uncontrolled variations in
employment and inflation. In this scenario the government's fiscal
management is corrective response for the problems of recovery and
recession. The government makes use of public spending and taxes to
minimise the gap of business cycles. This process is called fiscal
policy and the deliberate government involvement to stabilise economy is
regarded as discretionary fiscal policy. The government can make use
either taxes or government spending or both to stabilise economy but in
this study we only used government spending due to its larger and
positive multiplier effects.

This paper re-examines the causal relationship between stock
prices and macro variables like consumption expenditure, investment
spending, and economic activity (measured by GDP) in Pakistan. Using
annual data from 1959-60 to 1998-99 and applying cointegration and error
correction analysis, the paper indicates the presence of long-run
relationship between stock prices and macro variables. Regarding the
cause and effect relationship, the analysis indicates a one-way
causation from macro variables to stock prices, implying that in
Pakistan fluctuations in macro variables cause changes in stock prices.
The findings suggest that the stock market in Pakistan is not that
developed to play its due role in influencing aggregate demand. A
disturbing feature of the stock market in Pakistan is that it cannot be
characterised as the leading indicator of economic activity. In the
absence of other strong indicators, shooting up of stock prices may
indicate a speculative bubble.

Income, Money, and Prices are important macroeconomic
variables which play crucial roles in an economy. There has been a long
debate in economics regarding their roles. For example, the Monetarists
claim that money plays an active role and leads to changes in income and
prices. In other words, changes in income and prices in an economy are
mainly caused by the changes in money stocks. The Keynesians, on the
other hand, argue that money does not play an active role in changing
income and prices. In fact, changes in income cause changes in money
stocks via demand for money. Similarly, changes in prices are mainly
caused by structural factors.

The effect of changes in money supply on stock returns has
been a matter of controversy among economists for many decades. Those in
favour of presence of links between money market and stock market argue
that any change in money supply creates a wealth effect which disturbs
the existing equilibrium in the portfolio of investors. When they
re-adjust their asset portfolio, a new equilibrium is established in
which the price level of various assets is changed. On the other hand,
if the stock market is efficient, it would already have incorporated all
the current and anticipated changes in money supply. Consequently, a
causal relationship between changes in money supply and stock prices
will not be established. Moreover if the change in money supply
coincides with a corresponding change in the velocity of money, it will
not have any effect on stock prices. The pioneering work in this regard
was done by Sprinkel (1964). Using the data from 1918 to 1960, he found
a strong relationship between stock prices and money supply in the
United States. His conclusions, however, were mostly based upon
graphical analysis.

The relationship between money and prices has been a debated
issue among economic schools of thought particularly between the
Monetarists and the Keynesians. The monetarists claim that changes in
money stocks cause changes in price levels. In other words, the
direction of causation runs from money to prices implying that prices
can be controlled through money supply. The keynesians, on the other
hand, argue that money is important but is not responsible for changes
in price levels. Instead, structural factors play important role
suggesting that money supply is not an effective instrument to control
price changes. The causal relationship between money and prices has been
extensively tested in various countries. For example, Brillembourg and
Khan (1979) examined this relationship in USA. Using Sims procedure for
the period 1870-1975, they found unidirectional causality running from
money to prices. Similar directions of causation are reported by Lee and
Li (1983) and Ramachandran and Kamaiah (1992) who investigated the
causal relationship in Singapore and India respectively. On the other
hand, Aghevli and Khan (1978), while investigating the causal
relationship in Brazil, Columbia, the Dominican Republic, and Thailand,
found bidirectional causality between money and prices in these
countries.

A sound fiscal policy is important to promote price stability
and sustain growth in output and employment. Fiscal policy is regarded
as an instrument that can be used to lessen short-run fluctuations in
output and employment in many debates of macroeconomic policy. It can
also be used to bring the economy to its potential level. If
policymakers understand the relationship between government expenditure
and government revenue, continuous government deficits can be prevented.
Hence the relationship between government expenditure and government
revenue has attracted significant interest. This is due to the fact that
the relationship between government revenue and expenditure has an
impact on the budget deficit. The causal relationship between government
revenue and expenditure has remained an empirically debatable issue in
the field of public finance. The question of which variable takes
precedence over the other has been a central issue to this
debate.

In this paper we present arguments for increasing expenditure
on the education sector. We show that there exist large inequalities in
the distribution of education services across regions and across genders
so that ensuring equal opportunity for all in education, either for
normative or economic reasons, will require large additional investments
in this sector. We also present evidence which shows that while the rate
of return to education in the country may not be high it has been
increasing over time, so that higher expenditure on the education sector
is also economically justifiable. Enrollments at all levels have been
increasing over time, along with household and institutional expenditure
on the education sector, which suggests a greater willingness to invest
in education. If the productivity of education is low then it would be
natural to expect a decline over time in the willingness of the people
and the government to bear t he costs of education. But first, we
examine the evidence about the increasing unemployment of educated
labour and show that this does not mean that there is an economic
surplus of education in the country, nor that the education sector is
overextended, but that it can be explained by 'search time'.

Achieving economic growth is an important goal of any country.
However, in recent years it has increasingly been realised that economic
growth is a necessary but not a sufficient condition for human
development. Pakistan provides a good example of a country which has
historically enjoyed a respectable GDP growth rate and yet failed to
translate this positive development into a satisfactory level of human
development. Since its independence in 1947, Pakistan's development
policies have focused primarily on realising high economic growth and
only incidentally on the task of providing social necessities. Such a
process has given rise to a structure of production and distribution
which has been only indirectly responsive to social goals. However,
there is now a growing realisation that we could have done much better
had we stressed human resource investments relatively more. The
Education For All (EFA) movement, started more than a decade ago in
1990, accelerated the process of human resource development in many
developing countries. The EFA refers to the global commitment to ensure
that all children would complete Primary Education of good quality. A
decade after, the Millennium Declaration resolved to ensure, by 2015,
that all children would be able to complete a course of primary
education.