Suchergebnisse

Countries around the world are increasingly recognising that
the effective revenue system is the most important factor for economic
development. Factors effecting revenue potential measured as the revenue
to GDP has been one of the most important issues that concerns to
policy-makers from last three decades. Many developing countries face
difficulties in generating sufficient revenues for public expenditure.
In some countries budget deficits and the unproductive use of public
expenditures have narrow the vital investments in both human resources
and basic infrastructure that are necessary for providing base for
sustainable economic growth and development. Too much dependence on
foreign financing may cause problems of debt sustainability; therefore
developing countries will need to depend substantially on domestic
revenue generation. There is a large body of literature on tax revenue
potential in developing countries [Bahl (1971); Tanzi (1987); Leuthold
(1991); and Stotsky and Mariam (1997); Gupta (2007)]. However, there is
few studies that examine institutional and governance quality as a
factor influencing tax collection and tax revenue potential. According
to Tanzi and Davoodi (1997) and Gupta (2007) these factors are
responsible for low tax collection in developing countries by allowing
citizens inappropriate tax exemptions and enabling tax evasion due to
bad tax administration. Therefore, a precondition for ensuring adequate
revenue collection is a legitimate and responsive institutions following
the rule of law with control on corruption and having high quality
bureaucracy to administer. Studies also confirm that a strong political
will to reform is required for successful reform process [Bird (2004)].
Alm, et al. (2003) suggest that tax records of countries are reflection
of their political or societal institutions.

This study investigates the dynamics of beta by the asymmetric
response of beta to bullish and bearish market environment on 50 stocks
traded in Karachi Stock Exchange during 1993-2007. The results show that
the betas increase (decrease) when the market is bullish (bearish). The
results however suggest that investors receive a positive premium for
accepting down-side risk, while a negative premium is associated with
up-market beta. The results suggest that the conditional Fama and French
three factor model has performed better than the conditional CAPM when
news asymmetry was taken into account compared with the unconditional
Fama and French three factor model and the unconditional dual-beta CAPM
in explaining the relationship in beta and returns in case of Pakistani
market. JEL classification: G12, G15 Keywords: Beta Instability, High
Market Beta, Low Market Beta, EGARCH Model, News Asymmetry, Fama and
French Three Factor Model

The nature of relation between the ownership structure and
corporate governance structure has been the core issue in the corporate
governance literature. From a firms' perspective, ownership structure
determines the firms' profitability, enjoyed by different stake-holders.
In particular, ownership structure is an incentive device for reducing
the agency costs associated with the separation of ownership and
management, which can be used to protect property rights of the firm
[Barbosa and Louri (2002)]. With the development of corporate
governance, many corporations owned by disperse shareholders and are
controlled by hire manager. As a results incorporated firms whose owners
are dispersed and each of them owns a small fraction of total
outstanding shares, tend to under-perform as indicated by Berle and
Means (1932). Latter this theoretical relationship between a firm's
ownership structure and its performance is empirically examined by
Jensen and Meckling (1976) and Shlefier and Vishny (1986). In most of
developing markets including Pakistan, the closely held firms (family or
state-controlled firms or firms held by corporations and by financial
institutions) dominate the economic landscape. The main agency problem
is not the managershareholder conflict but rather the risk of
expropriation by the dominant or controlling shareholder at the expense
of minority shareholders. The agency problem in these markets is that
control is often obtained through complex pyramid structures,1 interlock
directorship,2 cross shareholdings,3 voting pacts and/or dual class
voting shares that allow the ultimate owner to maintain (voting) control
while owning a small fraction of ownership (cash flow
rights).

Enterprises need finance for investment and acquire it either
by internally generated finance or externally generated finance, which
are closely related to the ownership structure, financial market
development and enforcement of law of a country. In underdeveloped
companies with foreign owners have an advantage in their access to
external finance as compare to domestically owned companies because
their financial resources coming from abroad. Access to external finance
is a key determinant of a firm's ability to develop, operate, and
expand. Economic researchers have studied how various macroeconomic and
microeconomic factors influence such access; for example, it has been
shown that the need of external finance to depend on the macroeconomic
environment, since economic downturns tend to limit firms' ability to
borrow and banks' willingness to lend. This "credit channel" research
argues that corporate access to credit is the principal mechanism
linking monetary policy and the real economy. At the micro level,
research has shown that characteristics specific to a firm influence the
degree to which macroeconomic changes affect its access to external
financing; specifically, firms that are more vulnerable financially—such
as smaller, younger, riskier, and more indebted firms—are found to be
more affected by tighter monetary policy.

In the present study the economic, political and institutional
sources of budgets deficits are analysed for two regions South Asia and
ASEAN countries for the period 1984 to 2010. The results reveal that
high income, rising inflation and large budget to GDP ratio are
associated with budget instability, where as a strong inertia in budget
deficit volatility exists. The exposure of more external shocks make the
budget deficit more volatile, however, countries with high population
growth have less volatile budget deficits. The results indicate that
high level of political stability and democracy and improvement in
social and economic condition reduces the budget deficit volatility.
High corruption and low institutional quality lead to more fluctuations
in the budget deficit. The results suggest that political and
institutional factors have a direct impact on fiscal instability beyond
the economic reasons to effect fluctuations. The results of the current
study leads to important implication that by improving the quality of
institutions, creating situations for economic stability and moving
towards democratic regimes would ensure more stable fiscal deficits and
resultantly positive effect on the long term economic growth. JEL
classification: H61, D70, E60 Keywords: Budget Deficits Volatility, Per
Capita GDP, Openness, Inflation, Political Stability, Institutional
Quality, Democracy and Corruption

The relationship between fiscal policy and the current account
has long attracted interest among academic economists and policymakers
after introduction of the standard intertemporal model of the current
account by Sachs (1981) and its extension by Obstfeld and Rogoff, (1995)
in open economy macroeconomics. There are two major strands of the
current account literature Mundell-Fleming [Mundell (1968) and Fleming
(1967)] and Ricardian equivalence [Barro (1974, 1989)] to explain such
variations in the deficits. According to Mundell-Fleming model budget
deficits cause current account deficits through stimulating income
growth or exchange rate appreciation [Darrat (1988); Abell (1990);
Bachman (1992) and Bahmani-Oskooee (1992)]. On the other hand, there is
Ricardian view that the financing of budget deficits, either through
reduced taxes or by issuing bond does not alter present value wealth of
private households since both temporarily reduced taxes and issuance of
bonds represent future tax liabilities [Kaufmann, et al. (2002); Evans
(1989); Miller and Russek (1989); Enders and Lee (1990) and Kim (1995)].
The underlying reason is that the effects of fiscal deficits on the
current account depend on the nature of the fiscal imbalance. For
example, in a simple theoretical model in which Ricardian equivalence
holds, a cut in lump sum taxes and the ensuing fiscal deficit would not
affect the current account as the private savings increase will offset
the fiscal deficit but investment will be unchanged. Conversely, a
transitory increase in government spending will increase both the fiscal
deficit and the current account deficit, a case of twin deficits. And a
permanent increase in government spending will have no effects on the
current account while its effects on the fiscal balance will depend on
whether the extra spending is financed right away with taxes (in which
case the fiscal balance is unchanged) or whether it is financed with
debt (future taxes) in which case the fiscal balance worsens. Thus,
fiscal deficit may or may not lead to current account deficits depending
on the nature and persistence of the fiscal shock. There is also a third
scenario relate to Recardian view that portrays the possibility of
negative relationship between the deficits where, for example, output
shock give rise to endogenous movements and two deficits are
divergent.

There are two competing views of the interaction between
monetary and fiscal policy and their effects on price stability for
policy-maker's point of view. In the classical view, in Ricardian
regimes it is the demand for liquidity and its evolution over time that
determines prices. In such a regime fiscal policy is passive, which
implies that government bonds are not net wealth [Barro (1974)], and
monetary policy works through the interest rate or another instrument to
determine prices. In the opposite view which is more recent, a
non-Ricardian regime will prevail whenever fiscal policy becomes active1
and does not accommodate or adjust primary surpluses to guarantee fiscal
solvency. As a result, the Ricardian equivalence do not hold, and the
increase in nominal public debt to finance persistent budget deficits is
perceived by private agents as an increase in nominal wealth. In fiscal
dominant regime the government's fiscal policy becomes sustainable
through debt deflation that is an increase in prices that wash away the
real value of public debt and in turn the real value of financial wealth
until demand equals supply and a new equilibrium is reached. In this
regime prices are determined by fiscal policy, and inflation becomes a
fiscal phenomenon. If, on the other hand, primary surpluses follow an
arbitrary process, then the equilibrium path of prices is determined by
the requirement known as fiscal solvency; that is, the price level has
to jump to satisfy a present value budget constraint called
non-Ricardian regime. The basic distinction between the two regimes is
that in non-Ricardian regime fiscal policy plays the role where as in
Ricardian regime monetary policy provides stability in prices. In FTPL,
the results of fiscal and monetary policies depend on which policy has
dominant characteristics. The consequences of policies differ depending
on the active and passive characteristics of the policy and depending on
the characteristics of the following policy. If the policy mix is such
that monetary policy is active and fiscal policy is passive, fiscal
policy accommodates monetary policies; these policies are called
dominant monetary policy by Sargent and Wallace (1981) and Ricardian
regime by Woodford (1994, 1995).

The study examines the sustainability of public and external debt burden of Pakistan and India for the period 1971–2017. The debt dynamics equation for public debt uses two components for the analysis of public debt sustainability, namely, interest rate–growth rate differential and differential of primary budget balance-to-GDP and change of reserve money-to-GDP ratio. The equation for external debt dynamics also uses two components for the assessment of external debt sustainability, namely, current account balance-to-exports ratio and differential of exports growth and interest rate. The significance of the approach used in the current study lies in the fact that in case of evaluation of countries' debt sustainability, it is quite necessary to monitor debt trends along with emerging domestic and external vulnerabilities and systemic risks that threaten debt sustainability. This phenomenon has been captured through debt dynamics approach, which is used in the current study. The results are based on the estimation of two equations, namely, debt dynamics equation for overall public debt sustainability and debt dynamics equation for external debt sustainability. The results of the study indicate that primary budget deficit and current account deficit have played a significant role in the accumulation of public debt and external debt, respectively in Pakistan and India. The study concludes that public debt and external debt of Pakistan and India are sustainable but in a weak form.