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The Choice
of Foreign Product Strategy Between Two
Countries under Exchange Rate
Uncertainty
CHIN- TSAI UN AND CHENG-RU WU
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This study considers the effects of real
exchange rate on strategies that govern
the locations of production of by firms
that are entering/exiting foreign markets
in one country. This study extends the
Cobb-Douglas batch process production
model of Lin and Wu (2002), which
considers two locations of production in
two countries, respectively to establish a
decision valuation model for selecting the
three optimal locations for one in each
country. This paper applies the real
options approach (ROA) to evaluate the
behavior of the trans1erable 'location in
the two countries. The export-oriented
manufacturer is risk averse and has
rational expectations. As the entry
cost-declines, the export - oriented
manufacturer's entry trigger for the
Cobb-Douglas production function increases
for transferring from a domestic and to a
foreign location. Additionally, the
manufacturer's exit trigger for
Cobb-Douglas production function increases
for transferring from a foreign and to a
domestic location. Moreover, the exit cost
resembles the entry cost. |
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Relationship Between
Corporate Growth and Profitability
ABHISKEK SINHA, PREMRAJ PILLAI, RANJAN
VARGHESE AND SANGEET A D. MISRA
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Previous empirical and theoretical
research by Marris suggests that under
many circumstances firm growth may fall
short or generating any sustainable
competitive advantage and increasing
profitability and that high growth firms,
in particular, may incur some inherent
"growth" risks. including business
failure. Growth of a firm is measured in
terms or growth in assets and revenues
from main business line. Profitability of
a firm is measured in the form of Return
on Assets W1U Profit margin of a firm.
This study extends the work of Gartner & Markman from Fortune 500 companies in US
to top 30 Indian companies across six
sectors in empirically testing the
relationship between the growth and
profitability of a firm. The findings and
interpretations are based on the
statistical analysis carried out on the
growth and profitability parameters
mentioned earlier. This paper also offers
for why firm growth and profitability has
a different correlation across industries.
This paper also suggests that various
means employed for firm growth may no!
111cessarily translate into increasing
profitability and associated value
creation. |
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Rural-Urban
Migration: A Search for Economic
Determinants
HADI GHAFFARI AND S. P. SINGH
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The contributing factors for rural-urban
migration may either be "push" or "pull",
with ,the former guided by force of
internal circum- stances and the latter by
lure. of external attractions or
incentives. The present paper attempts to
identify the major push and pull factors
responsible for rural out-migration, based
on the data collected from 1991 Census for
50 districts of Uttar Pradesh. The OLS
regression model has been applied to
examine the impact of various determinants
on rural-urban migration. It has been
found that development of educational
facilities as well as irrigation
facilities in rural areas and acceleration
of industrialization process in these
areas are significant variables in abating
the flow of rural exodus. |
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Detection of
.Inter-State Kuznets Cycle through
Neo-Classical and eo-Keynesian Paradigms:
Indian Experience
ACHAL KUMAR GAUR
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Kuzents hypothesis (1955, 1963) has
established a link between inequality and
average well-being at the level of
economy. The hypothesis maintains that
given a two-sector economy with not much
inequality within sectors but different
sectoral mean incomes, a continuous
transfer of population from one sector to
another will initially raise the aggregate
inequality and it will decrease at later
stage.
Inter-state Kuznets hypothesis has been
tested in the present paper for the twenty
states of the Indian federation for which
per capita state domestic (at current
prices) data has been taken for the period
1980-81 to 2001-02. The result reveal
existence of Kuznets cycle for per capita
state domestic product (SOP) in the Indian
states.
Regression results based on OLS technique
suggest that inter- state inequality in
per capita revenue of states
(pre-devolution period), per capita
revenue of the state (post-development
period) and per capita expenditure of
states were primarily responsible for
growing inter-state income inequality in
India during 1980-81 to 1999-2000. The
study may help in identifying the
economically backward states [or
transferring the funds to them from
central divisible pool of resources in
order to accelerate the principle of
'horizontal equity' and 'balanced regional
development' in a federation. |
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The Impact of
Interest Rates on Savings Mobilization in
Nigeria (]970-2000): A Co-Integration
Approach
M. O. VICTOR OUSEAND R. O. ABIOLA
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The role of interest rates in savings
mobilization at best has remained
controversial. While economic theory would
tend to suggest a positive correlation
between savings and interest rates, the
result of most empirical works
particularly for developing countries do
not at best conform with the expectations.
It is, therefore, the objective of this
study, considering the structure of
interest rate, the pre-SAP interest rate
management regime, to examine the effect
of interest rates on savings mobilization
in Nigeria. Data on interest rates in
Nigeria from 1970 -2000 were collected and
a co-integration method of analysis was
used.
It was found that the specific variables
that influence aggregate savings ratio in
Nigeria includes lagged savings -income
ratio, current ratio of foreign savings to
GDP, Lag foreign savings -GDP ratio and a
dummy variable capturing financial
liberalization. The empirical result
showed the existence of a long run
equilibrium relationship between these
variables and aggregate savings ratio in
Nigeria. |
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The
Relative Effectiveness of Fiscal and
Monetary Policy in the Indian Context
(1970-71 to 1999-2000)
G. RAMATHILAGAMAND Ms. S. AMUDHA
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This study on the relative effectiveness
of fiscal and monetary policy using the
Indian macro level data for the period
1970-7 I to 1999-2000 in the modified St.
Louis equation and Granger
causality
frameworks had confirmed that monetary
policy as measured by Ml is relatively
more potent than fiscal policy. It
underlines the need for limiting
Government expenditure that results in
crowding-out effect. It recommends that
the Government should focus on monetary
policy targets and strive for central bank
independence to ensure stability in the
policy environment. It concludes that
fiscal policy is a necessary, but not a
sufficient condition for stability in the
economy. |
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Mixture Distribution
Models of Indian Stock Returns: An
Empirical Comparison
D. S. BROCA
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A significant portion of financial theory
assumes that stock price relatives are
independent and identically distributed
according to a normal (Gaussian)
distribution. However, this assumption has
long been disputed; the distribution of
security returns has fatter tails and some
positive skewness compared to the normal
curve. In an attempt to capture these
features, two heavy-tailed mixture
densities are proposed for Indian stock
returns; the Student t and the double
normal. Model calibration over a fourteen
year period, 1985-1998, revealed that the
Student t distribution provides a superior
fit on the basis of the Schwarz criterion.
This raises concerns about the
applicability of mainstream financial
models, based on the Gaussian postulate,
to Indian markets. |
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Primary
Co-operative Banks: A Paradox of Loss WEN
RONG Liu: A Note on investigating Causal
Link Between the Hidden Economy and Real
GDP in Taiwan, 1962-2001 Contents: Indian
Association of Social Science Institutions
(lASSI), Vol. 21, No.1, July-September
2002
KUMUD SHARMA
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A strange problem is faced by the Primary
Co-operative Agricultural and Rural
Development Banks (PCARDBs). They borrow
from the upper tier, the State
Co-operative Agricultural and Rural
Development Bank (SCARDB) at a lower rate
of interest and lend it to the farmers and
when it is repaid they pay it back to the
SCARDB. Superficially seen, out of this
simple operation, PCARDBs should earn
profit, because the regular and the penal
interests charged by the PCARDBs to the
farmers are higher than the corresponding
rates charged by the SCARDB to the PCARDBs.
However, the PCARDBs suffer loss, when
some of the borrowers repay regularly and
some repay it at a later date. The present
paper throws light on the causes, the
solutions to and the gravity of the said
problem. |
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A
Note on investigating Causal Link Between
the Hidden Economy and Real GDP in Taiwan,
1962-2001 Contents: Indian Association of
Social Science Institutions (lASSI), Vol.
21, No.1, July-September 2002
WEN RONG Liu
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In this study, we first re-estimate the
size of the hidden economy based on
Tanzi's (1983) currency-ratio approach for
the first time in the Taiwan context
covering such a long time period (1962-200
I); second, we investigate time series
properties of the estimated real hidden
economy and real GDP; and third, we test
the hypothesis of a long-run relationship
and causal link between the estimated
hidden economy and real. GDP over this
sample period. The test result indicates
that these two variables are co-integrated
with one vector indicating a long-run
equilibrium relationship exists
between-these two variables. Granger-
causality test result based on vector
error-correction model (VECM) suggests a
bi-directional causality (feedback)
between these two variables. This result
poses a dilemma for Taiwan policy makers
who wish to stimulate economic growth and
also minimize the size of the "tax gap" in
Taiwan over this sample period. |
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