Inflation, Output Growth and Macroeconomic Uncertainties in Pakistan and India

By: Rasul, S., Bhatti, A. A. Khan, H. & Jabeen, M.
This paper examines the dynamic relationships among inflation, output growth and their uncertainties for Pakistan and India for the period 1982-M4 to 2012-M12. We use various GARCH models to estimate the conditional variances that are used as proxies for the uncertainties of inflation and output growth. Finally, we use the bi-variate ARMA (p,q)-GARCH-M (1,1) models with diagonal BEKK specification to find the twelve causal relationships among inflation, output growth and their uncertainties. Our evidence supports the number of important conclusions. Firstly, we find that Friedman (1977) hypothesis, i.e., inflation leads to increase the inflation uncertainty is not supported in both Pakistan and India. Secondly, Cukierman-Meltzer (1986) hypothesis is accepted in Pakistan and Holland (1995) hypothesis is accepted in India. Thirdly, Black (1987) hypothesis is accepted in Pakistan and Deveraux (1989) hypothesis is accepted in India. We also find the strong relationship that higher output growth reduces the inflation in both India and Pakistan. We also conclude that the policy makers of both countries may take measures to reduce inflation rate because output growth is inversely related to inflation and the prevailing uncertainty in the economy.

http://www.bzu.edu.pk/PJSS/Vol36No12016/PJSS-Vol36-No1-14.pdf

The University of Manchester is 5th among the 11 UK universities which produce the most employable graduates

Proud to be alumnus of the University of Manchester, UK.

http://www.businessinsider.com/times-higher-education-best-uk-universities-for-employability-2016-11/#11-university-of-nottingham-the-university-scooped-the-times-good-university-guides-university-of-the-year-award-for-graduate-employment-in-201516-1

2016 Nobel Prize in Economics awarded to Oliver Hart and Bengt Holmström

This year, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2016 has been awarded to both Oliver Hart, Professor of Economics at Harvard University and Bengt Holmström, Professor of Economics at the Massachusetts Institute of Technology. The Nobel Prize in Economics was given to the Professors for their contributions to contract theory, as mentioned by the Royal Swedish Academy of Sciences in their press release.

This year’s laureates have worked extensively on the construction of a clearly defined and detailed regulatory rubric for determining, among other things, the method of reward for company executives and further analysis of the privatization of public companies or even entire public sectors, whether in whole or in part. The new theoretical tools developed by Hart and Holmström are valuable to understand real-life contracts and institutions as well as potential pitfalls in contract design.

Impact of Tax and Transfers on Income Inequality and Budget Deficit: A CGE Analysis for Pakistan

By Arshad Ali Bhatti, Zakia Batool, Hasnain A. Naqvi

This paper analyzes the impact of tax and transfers on income distribution. We use a simple Computable General Equilibrium model for Pakistan (CGEP) adapted from Lofgren et al (2001). Our CGE model takes into account the market interactions, that is, the effects of pricing outcomes of one market in other markets: which in turn create ripples throughout the whole economy, even to the extent of affecting the price-quantity equilibrium in the original market. We use Social Accounting Matrix (SAM) 2008 as developed by Debwicz et al (2012). To explore the impact of tax and transfers on income inequality, two sets of simulation exercises are performed. Further, we examine the inequality effects using Theil T, Theil L, THeil S and Hoover's Indexes. Our results show that a policy mix of sales tax, income tax and government expenditures helps in reducing income inequality; while at the same time it lessens the economy's financial dependency.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2702750

A Robust Sensitivity Analysis of Cross-Country Finance-Growth Regressions

By: Arshad Ali Bhatti, IIIE 

This paper addresses the issue of outliers in finance-growth literature and provides a robust sensitivity analysis of some past studies and an updated data set. We employ the robust regression methods of median quantile regression and least trimmed squares. It shows that the findings of past studies are sensitive to outlier observations. Further, we find that the positive effect of financial development on growth disappears and even becomes negative once we use our extended data set of 86 countries over the period 1997-2006. This last finding is consistent with Rousseau and Wachtel (2011). Moreover, we investigate whether our understanding of the finance-growth relationship can further be improved by introducing a measure of R&D into the standard analysis. We note that our measure of R&D has a strong positive effect on growth and may proxy the role of an omitted variable which is highly correlated with economic growth.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2432519

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4th Islamic Banking and Finance Conference (IBF 2014)

The constraints applied by Islamic banks rendered them more resilient in the recent financial crisis compared to their conventional counterparts. This has attracted the attention of market participants and researchers to their liquidity buffers, leverage ratios, managerial efficiency and bespoke financial products. Islamic banking products are now offered in more than twenty countries and their expanding suite includes bonds, equity indices and insurance. The sector is estimated to exceed $1trillion in value, while growing at about 15% per annum...For more details see:

http://www.lums.lancs.ac.uk/research/centres/golcer/ibf-2014/