Monday, January 14, 2013
Wednesday, January 2, 2013
The Global Financial Crisis and Indian Banks: Survival of the Fittest?
NIPFP Working Paper 113
[PDF]
Barry Eichengreen and Poonam Gupta
December 2012
Abstract
The Indian banking system was initially thought to be insulated from the global financial crisis owing to heavy public ownership and cautious management. It was thus a surprise when some banks experienced a deposit flight, as depositors shifted their money toward government-owned banks and specifically toward the State Bank of India, the largest public bank. While there was some tendency for depositors to favour healthier banks and the banks with more stable funding, the reallocation of deposits toward the State Bank of India in particular cannot be explained by these factors alone. Nor can it be explained by the impact of explicit capital injections by the government into some public-sector banks. Rather it appears that the implicit guarantee of the liabilities of the country’s largest public bank dominated other considerations.
[PDF]
Barry Eichengreen and Poonam Gupta
December 2012
Abstract
The Indian banking system was initially thought to be insulated from the global financial crisis owing to heavy public ownership and cautious management. It was thus a surprise when some banks experienced a deposit flight, as depositors shifted their money toward government-owned banks and specifically toward the State Bank of India, the largest public bank. While there was some tendency for depositors to favour healthier banks and the banks with more stable funding, the reallocation of deposits toward the State Bank of India in particular cannot be explained by these factors alone. Nor can it be explained by the impact of explicit capital injections by the government into some public-sector banks. Rather it appears that the implicit guarantee of the liabilities of the country’s largest public bank dominated other considerations.
The Real Exchange Rate and Export Growth: Are Services Different?
NIPFP Working Paper 112
[PDF]
Barry Eichengreen and Poonam Gupta
December 2012
Abstract
We consider the determinants of exports of services, distinguishing between modern and traditional services. We consider both the growth of export volumes and so-called export surges – periods of rapid sustained export growth. We ask whether the determinants of export growth rates and surges differ between merchandise, traditional services and modern services and whether developing countries are different. Our findings confirm the importance of the real exchange rate for export growth. We find that the effect of the real exchange rate is even stronger for exports of services than exports of goods; it is especially strong for exports of modern services. While the evidence of differential effects between advanced and developing countries is weaker, our results nonetheless suggest that as developing countries shift from exporting primarily commodities and merchandise to exporting traditional and modern services in the course of their development, appropriate policies toward the real exchange rate become even more important.
[PDF]
Barry Eichengreen and Poonam Gupta
December 2012
Abstract
We consider the determinants of exports of services, distinguishing between modern and traditional services. We consider both the growth of export volumes and so-called export surges – periods of rapid sustained export growth. We ask whether the determinants of export growth rates and surges differ between merchandise, traditional services and modern services and whether developing countries are different. Our findings confirm the importance of the real exchange rate for export growth. We find that the effect of the real exchange rate is even stronger for exports of services than exports of goods; it is especially strong for exports of modern services. While the evidence of differential effects between advanced and developing countries is weaker, our results nonetheless suggest that as developing countries shift from exporting primarily commodities and merchandise to exporting traditional and modern services in the course of their development, appropriate policies toward the real exchange rate become even more important.
Wednesday, December 19, 2012
Public Expenditure Benefit Incidence on Health: Selective Evidence from India
NIPFP Working Paper 111
[PDF]
Lekha Chakraborty, Yadawendra Singh and Jannet Farida Jacob
December 2012
Abstract
Effectiveness of public spending still remains relatively an elusive empirical issue. This preliminary analysis is an attempt on the topic, using benefit incidence methodology, at the subnational government level in health sector of India. The results revealed public health system is ‘seemingly’ more equitable in a few States, while a regressivity in pattern of utilization of public health care services is observed in other States. Both these evidences were to be considered with caution, as the underdeveloped market for private inpatient care in some states might be the factor for disproportionate crowding-in of inpatients, which made the public health care system looked ‘seemingly’ more equitable. However, the ‘voting with feet’ to better private services seems evident only for the affordable higher income quintiles. Results also suggest that polarization is distinctly evident in the public provisioning of heath care services, more related to the in-patient services than the ambulatory services.
[PDF]
Lekha Chakraborty, Yadawendra Singh and Jannet Farida Jacob
December 2012
Abstract
Effectiveness of public spending still remains relatively an elusive empirical issue. This preliminary analysis is an attempt on the topic, using benefit incidence methodology, at the subnational government level in health sector of India. The results revealed public health system is ‘seemingly’ more equitable in a few States, while a regressivity in pattern of utilization of public health care services is observed in other States. Both these evidences were to be considered with caution, as the underdeveloped market for private inpatient care in some states might be the factor for disproportionate crowding-in of inpatients, which made the public health care system looked ‘seemingly’ more equitable. However, the ‘voting with feet’ to better private services seems evident only for the affordable higher income quintiles. Results also suggest that polarization is distinctly evident in the public provisioning of heath care services, more related to the in-patient services than the ambulatory services.
Determination of Interest Rate in India: Empirical Evidence on Fiscal Deficit-Interest Links and Financial Crowding Out
NIPFP Working Paper 110
[PDF]
Lekha Chakraborty
December 2012
Abstract
Controlling for the capital flows, using the high frequency macrodata of financially deregulated regime, the paper examined whether there is any evidence of fiscal deficit determining interest rate in the context of India. The period of analysis is FY 2006-07[04] to FY 2011[04]. Quite contrary to the debates in the policy circles, the results found that increase in fiscal deficit does not cause the rise in interest rates. Using the asymmetric vector autoregressive model, it is established that the rate of interest is affected by the reserve money changes, expected inflation and volatility in the capital flows, but not the fiscal deficit. This result has significant policy implications for interest rate determination in India. The long term and short term interest rates are analysed to determine the occurrence of financial crowding out, but fiscal deficit does not appear to be causing both shorts and longs.
[PDF]
Lekha Chakraborty
December 2012
Abstract
Controlling for the capital flows, using the high frequency macrodata of financially deregulated regime, the paper examined whether there is any evidence of fiscal deficit determining interest rate in the context of India. The period of analysis is FY 2006-07[04] to FY 2011[04]. Quite contrary to the debates in the policy circles, the results found that increase in fiscal deficit does not cause the rise in interest rates. Using the asymmetric vector autoregressive model, it is established that the rate of interest is affected by the reserve money changes, expected inflation and volatility in the capital flows, but not the fiscal deficit. This result has significant policy implications for interest rate determination in India. The long term and short term interest rates are analysed to determine the occurrence of financial crowding out, but fiscal deficit does not appear to be causing both shorts and longs.
Tuesday, November 27, 2012
How Indian Voters Respond to Candidates with Criminal Charges: Evidence from the 2009 Lok Sabha Elections
NIPFP Working Paper 109
[PDF]
Bhaskar Dutta and Poonam Gupta
October 2012
Abstract
This paper examines the response of voters to candidates who have reported that they have criminal charges against them, within the framework of a simple analytical model which assumes that criminal charges give rise to some stigma amongst the electorate, and result in a negative effect on vote shares. Campaigning, the cost of which is borne from candidates’ wealth, helps a candidate to increase his or her expected vote share by winning over the “marginal” voter. A criminal candidate gets an additional benefit since he can use the campaigning to convince voters of his innocence, and so reduce the negative effects of the stigma associated with criminal charges. We test the implications of the model using data for the 2009 Lok Sabha elections in India, and find support for all the implications of the model. Our empirical results show that voters do penalise candidates with criminal charges; however, this negative effect is reduced if there are other candidates in the constituency with criminal charges; besides, the vote shares are positively related to candidate wealth, with the marginal effect being higher for the candidates with criminal charges.
[PDF]
Bhaskar Dutta and Poonam Gupta
October 2012
Abstract
This paper examines the response of voters to candidates who have reported that they have criminal charges against them, within the framework of a simple analytical model which assumes that criminal charges give rise to some stigma amongst the electorate, and result in a negative effect on vote shares. Campaigning, the cost of which is borne from candidates’ wealth, helps a candidate to increase his or her expected vote share by winning over the “marginal” voter. A criminal candidate gets an additional benefit since he can use the campaigning to convince voters of his innocence, and so reduce the negative effects of the stigma associated with criminal charges. We test the implications of the model using data for the 2009 Lok Sabha elections in India, and find support for all the implications of the model. Our empirical results show that voters do penalise candidates with criminal charges; however, this negative effect is reduced if there are other candidates in the constituency with criminal charges; besides, the vote shares are positively related to candidate wealth, with the marginal effect being higher for the candidates with criminal charges.
Wednesday, November 21, 2012
A Cost-Benefit Analysis of Aadhaar
National Institute of Public Finance and Policy
November 2012
[Link]
Abstract
This study estimates the costs and benefits of Aadhaar. We find that substantial benefits would accrue to the government by integrating Aadhaar with schemes such as PDS, MNREGS, fertiliser and LPG subsidies, as well as housing, education and health programmes. The benefits arise from the reduction in leakages that occur due to identification and authentication issues. Our analysis takes into account the costs of developing and maintaining Aadhaar, and of integrating Aadhaar with the schemes over the next ten years. Even after taking all costs into account, and making modest assumptions about leakages, of about 7-12 percent of the value of the transfer/subsidy, we find that the Aadhaar project would yield an internal rate of return in real terms of 52.85 percent to the government.
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