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Article
Publication date: 7 August 2017

Malepati Jayashankar and Badri Narayan Rath

The purpose of this study is to examine linkage between exchange rate, stock return and interest rate for India.

Abstract

Purpose

The purpose of this study is to examine linkage between exchange rate, stock return and interest rate for India.

Design/methodology/approach

Using monthly data from January 2000 to December 2014, this study has scrutinized the linkage between exchange rate, stock return and interest rate using maximum overlap discrete wavelet transform (MODWT) which is very much appropriate when the variables are discrete in nature.

Findings

Our major findings indicate that the empirical relationship between these variables is not significant at lower scales. As we go on higher scales, there is a clear linkage between them, and three markets are associated with each other. Moreover, the direction and type of the relationship depends on the frequency bands, and finally with the help of Granger causality tests, we established a lead/lag relationship between stock price, exchange rate and interest rate.

Research limitations/implications

The linkage between stock market, foreign exchange market and money market in case of emerging countries like India is more relevant because negative or positive shocks affecting one market may be transmitted quickly to another through contagious effect.

Originality/value

Little attention has been given to examine the link between stock return, exchange rate and interest rate in India. This study adopts a more sophisticated MODWT approach for examining the cross-correlation and causality.

Details

Studies in Economics and Finance, vol. 34 no. 3
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 5 August 2019

Vaseem Akram and Badri Narayan Rath

The purpose of this paper is to examine the convergence analysis of public debt among Indian states using annual data from 1990‒1991 to 2014‒2015.

Abstract

Purpose

The purpose of this paper is to examine the convergence analysis of public debt among Indian states using annual data from 1990‒1991 to 2014‒2015.

Design/methodology/approach

The paper tests this hypothesis using club convergence technique propounded by Phillips and Sul (2007).

Findings

The results reveal the existence of debt divergence for overall Indian states. States are formed into four clubs on the basis of their level of debt, and three clubs support the hypothesis of club convergence. Further, the total public debt decomposes into three compositions such as market loans, bank loans and loans and advances from the central government. The existence of convergence is found for market loans and bank loans; however, the presence of divergence is found in case of loans and advances for overall states.

Practical implications

Since public debt plays an important role for fiscal health of the Indian states, findings of this study suggest to squeeze the fiscal consolidation further for Indian states whose debts as a percentage to gross state domestic product are on the higher side. Further, the examination of debt convergence helps to manage debt level among the states because heavy dependence on public debt could retard investment and economic growth.

Originality/value

Whereas bulk of empirical studies emphasize on examining the linkage between public debt and economic growth, and issue on debt sustainability across Indian states, examination of convergence of debt and its compositions (markets borrowings, bank loans and loans and advances from the central government) among the Indian states is scanty.

Details

Journal of Economic Studies, vol. 46 no. 4
Type: Research Article
ISSN: 0144-3585

Keywords

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Article
Publication date: 4 July 2019

Vaseem Akram and Badri Narayan Rath

The purpose of this study is to examine the fiscal sustainability issue by dividing the fiscal deficit into high and low regimes using the quarterly data from 1997: Q1 to…

Abstract

Purpose

The purpose of this study is to examine the fiscal sustainability issue by dividing the fiscal deficit into high and low regimes using the quarterly data from 1997: Q1 to 2013: Q3. Further, we obtain the optimum level of public debt at which fiscal sustainability can be achieved.

Design/methodology/approach

This study uses the Markov Switching-Vector Error Correction Model (MS-VECM) for examining fiscal sustainability and threshold regression model to obtain the optimum level of debt.

Findings

The results derived from MS-VECM reveal the evidence in favor of fiscal sustainability during low fiscal deficit periods. Similarly, using a threshold regression model, the optimum public debt as a percentage to GDP seems to be around 21 per cent on a quarterly basis, beyond this level, public debt hurts economic growth.

Practical implications

From the policy front, the government of India should cut down the fiscal deficit only if debt reaches beyond a threshold level.

Originality/value

Noting that the vast literature has focused on examining the fiscal sustainability in India, the novelty of this study is to examine the fiscal sustainability by considering high and low deficits regimes using a non-linear approach.

Details

Studies in Economics and Finance, vol. 38 no. 2
Type: Research Article
ISSN: 1086-7376

Keywords

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Article
Publication date: 30 October 2018

Vaseem Akram, Bhushan Praveen Jangam and Badri Narayan Rath

This paper aims to investigate whether improvement in human capital can foster energy conservation by reducing the energy consumption in India using annual data from 1980…

Abstract

Purpose

This paper aims to investigate whether improvement in human capital can foster energy conservation by reducing the energy consumption in India using annual data from 1980 to 2014. Further, this study examines the relationship between human capital and various forms of energy consumption such as electricity, coal, natural gas, hydrocarbon gas and petroleum consumption.

Design/methodology/approach

To attain the objective, the study investigates this relation through the auto-regressive distributed lag model (ARDL) technique to find a long-run and short-run relationship. Second, to check the robustness of the results, the authors use alternative econometric methods such as dynamic ordinary least squares and fully modified dynamic ordinary least squares.

Findings

The results reveal a negative relationship between human capital and energy consumption, which implies that improvement in human capital lowers the energy consumption and various forms energy consumption, except for petroleum consumption. The results derived from ARDL show that there exists a long-run and short-run association between human capital and energy consumption. The results are consistent across the econometric techniques.

Practical implications

Because G20 countries including India aim at reducing carbon emission to a certain level, this study provides an insight that by emphasizing on human capital, India can reduce energy consumption, which would foster energy conservation.

Originality/value

To the best of the authors’ knowledge, this the first study in India which attempts to examine the effect of human capital on energy consumption and its various forms.

Details

International Journal of Energy Sector Management, vol. 13 no. 2
Type: Research Article
ISSN: 1750-6220

Keywords

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Article
Publication date: 6 November 2017

Vaseem Akram and Badri Narayan Rath

The purpose of the paper is to examine the impact of exchange rate misalignment on economic growth in India using annual data from 1980 to 2014.

Abstract

Purpose

The purpose of the paper is to examine the impact of exchange rate misalignment on economic growth in India using annual data from 1980 to 2014.

Design/methodology/approach

First, misalignment is measured, which is defined as the deviations of the actual real exchange rate (RER) from its equilibrium level. The equilibrium real exchange rate (ERER) is estimated using the auto-regressive distributed lag (ARDL) model by considering key macroeconomic fundamentals of the determinants of RER. Zivot and Andrews’ unit root with structural break is used to test the stationarity property of data. The impact of exchange rate misalignment on economic growth has been examined using ARDL and variance decomposition techniques.

Findings

Our results find an overvaluation of the exchange rate till 2000, and thereafter, an undervaluation of the exchange rate prevails in India. Further, the result indicates that an increase in exchange rate misalignment leads to a decrease in economic growth and vice versa. Moreover, a positive misalignment (overvaluation) hurts the economic growth and a negative misalignment (undervaluation) promotes the economic growth.

Research limitations/implications

From the policy perspective, the results highlight that India needs to maintain an appropriate exchange rate which can reduce the RER misalignment. It is better for the Reserve Bank of India (RBI)’s intervention to smoothen the fluctuations of the exchange rate to avoid the inefficiency in the allocation of resources. However, to minimize the RER misalignment, the intervention should be conducted only in the short run.

Originality/value

The study contributes to the existing literature by estimating the exchange rate misalignment for India and its impact on economic growth.

Details

Journal of Financial Economic Policy, vol. 9 no. 4
Type: Research Article
ISSN: 1757-6385

Keywords

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Article
Publication date: 26 February 2020

Vaseem Akram, Pradipta Kumar Sahoo and Badri Narayan Rath

This paper investigates the per-capita output club convergence in case of 120 countries for the period 1995–2015. Further, we disaggregate per-capita output into three…

Abstract

Purpose

This paper investigates the per-capita output club convergence in case of 120 countries for the period 1995–2015. Further, we disaggregate per-capita output into three broad sectors such as agriculture, industry, and service and investigate the convergence hypothesis.

Design/methodology/approach

The paper tests this hypothesis using the Phillips and Sul panel club convergence technique.

Findings

Our findings are as follows: (1) our results indicate the evidence of output divergence for the full sample; (2) when countries are divided into different clubs, the results exhibit the sign of per capita output club convergence both for aggregate and three major sectors. Further, this study confirms that industry's per capita output is the main driver for aggregate per-capita output club convergence in case of club 1. For club 2, agriculture's per capita output is a primary source for aggregate per capita output club convergence. Likewise, in the case of clubs 3 and 4, we find the service sector's per capita output is the main component for aggregate per-capita output club convergence; (3) both the service and industry sectors are major drivers for aggregate per-capita output club convergence.

Practical implications

This study suggests to the policymaker that sector-specific policies need to be adopted to boost the per-capita output growth by improving the performance of each of the sectors across the countries.

Originality/value

Notwithstanding, there are many studies that examine the output convergence using a notion of beta and sigma convergence, but studies regarding per capita output club convergence both at the aggregate and sectoral level are scanty.

Details

Journal of Economic Studies, vol. 47 no. 4
Type: Research Article
ISSN: 0144-3585

Keywords

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Article
Publication date: 29 November 2018

Seenaiah Kale and Badri Narayan Rath

The purpose of this paper is to examine whether innovation plays a significant role in the total factor productivity (TFP) growth in India at an aggregate level.

Abstract

Purpose

The purpose of this paper is to examine whether innovation plays a significant role in the total factor productivity (TFP) growth in India at an aggregate level.

Design/methodology/approach

This study first estimates the TFP growth using a growth accounting framework. In the second stage, the authors examine the long-run and short-run impact of innovation on TFP growth using the ARDL bound testing approach.

Findings

The results indicate a cointegrating relationship between innovation and TFP growth. Further, coefficients of long-run elasticity show that the increase in overall innovation activities improves the TFP growth. Other factors such as human capital, financial development and FDI do not affect the TFP growth in the long run; however, these variables significantly affect the productivity growth in the short run.

Practical implications

Findings of the study suggest that the innovation-friendly policies such as the strengthening of intellectual property rights, R&D subsidies and innovation rebates may spur the productivity growth, and hence, good growth and prosperity as well.

Originality/value

Having devoted a large volume of literature to address the sources of economic growth, the present study focuses on the determinants of TFP growth in India which may fall in similar category but differ in several angles: First, the authors construct a TFP index using a growth accounting framework. Second, the authors construct an innovation index using principal component analysis which is new to the literature and also an innovation index. Third, given the scanty innovation activities in low developed countries like India and its widening role in the contemporary literature, special emphasis will be given to this aspect. Finally, the effect of the examined relationship on TFP growth in the long run and short run provides several implications for policy purpose to the developing nations like India.

Details

International Journal of Emerging Markets, vol. 13 no. 5
Type: Research Article
ISSN: 1746-8809

Keywords

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Article
Publication date: 2 June 2020

Bhushan Praveen Jangam and Badri Narayan Rath

The primary purpose of this study is to examine whether the classification of industries into the tradable and nontradable matters for the Balassa–Samuelson (BS) effect.

Abstract

Purpose

The primary purpose of this study is to examine whether the classification of industries into the tradable and nontradable matters for the Balassa–Samuelson (BS) effect.

Design/methodology/approach

The study uses annual data for 38 countries from 1995 to 2014. To examine whether the classification of industries matter, the study proceeds with two approaches, that is, “traditional” and “benchmark”.

Findings

First, by applying panel cointegration tests of Pedroni and Westerlund, the results validate the BS hypothesis. However, the coefficients of long-run elasticities show appreciation of real exchange rate (RER) due to increase in productivity in the case of “traditional approach”, whereas depreciation of RER in the case of “benchmark approach”. Second, by applying the Dumitrescu-Hurlin panel Granger causality test, the results reveal the bi-directional causality among RER and productivity for both the approaches. Further, to provide more insights, the study employs a fixed-effects panel threshold model. The results indicate that increase in productivity leads to both appreciation and depreciation of RER depending on threshold regimes.

Practical implications

The study ascertains that the evidence of BS effect depends on the choice of approach considered. However, irrespective of the classification, there exists a BS effect beyond a threshold.

Originality/value

Although the BS effect is well established in the literature; there is no study examining the importance of classification of industries at a disaggregated level. Furthermore, there is no consideration of threshold effects.

Details

Journal of Economic Studies, vol. 47 no. 5
Type: Research Article
ISSN: 0144-3585

Keywords

Content available
Article
Publication date: 7 September 2015

S.K. Shanthi, Sanjoy Sircar and K. Srinivasa Reddy

Abstract

Details

International Journal of Commerce and Management, vol. 25 no. 3
Type: Research Article
ISSN: 1056-9219

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Article
Publication date: 21 April 2020

Bhushan Praveen Jangam and Vaseem Akram

The purpose of this paper is to examine the nexus between financial integration and export diversification.

Abstract

Purpose

The purpose of this paper is to examine the nexus between financial integration and export diversification.

Design/methodology/approach

The authors consider 96 economies spanning over the period 1995-2014. To provide broader insights, the authors categorize 96 economies into developed, developing, high and low diversified panels. Both volume and equity-based measures of financial integration are used. The generalized method of moments (GMM) method is used to analyze the link between financial integration and export diversification.

Findings

The results derived from GMM indicate that financial integration is a vital factor of export diversification. Further, the findings reveal similar conclusions for developed, developing, high and low diversified panels.

Research limitations/implications

The outcome of this study suggests that promoting the financial integration of markets by lowering the restrictions on capital inflows helps countries to lower the risk and diversify their exports.

Originality/value

Though there exists enormous literature on export diversification, the nexus between financial integration and export diversification is limited. The present study bridges this research gap.

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