Anurag N. Banerjee

Economic development, institutional change, and the political economy of agricultural protection An econometric study of Belgium since the 19th century

This empirical study uses 100 years of annual data on 11 agricultural commodities from Belgium to measure the impact of structural changes coinciding with economic development and changes in political institutions on agricultural protection. The analysis shows that changes in agricultural protection are caused by a combination of factors. Governments have increased protection and support to farmers when world market prices for their commodities fell, and vice versa, offsetting market effects on producer incomes. Other economic determinants were the share of the commodities in total consumer expenditures (negative effect) and in total output of the economy (positive effect). With Belgium a small economy, there was no impact of the trade position. Changes in political institutions have affected agricultural protection. Democratic reforms which induced a significant shift in the political balance towards agricultural interests, such as the introduction of the one-man-one-vote system, led to an increase in agricultural protection. The integration of Belgian agricultural policies in the Common Agricultural Policy in 1968 coincided with an increase in protection, ceteris paribus. Both institutional factors, related to changes in access to and information about the decision-making at the EU level, and structural changes in the agricultural and food economy may explain this effect.

The political economy of public research investment and commodity policies in agriculture: an empirical study

The paper tests a political economy theory of simultaneous government decision-making on income redistribution through commodity policies and on public research investment in agriculture. We use data from 37 countries on agricultural protection and public agricultural research expenditures (PARI). The empirical results are consistent with the political economy hypotheses. The analysis suggest that structural changes in the economy have important effects on the political incentives for governments not only to subsidize or tax farmers, but also to invest in public agricultural research. Furthermore, the analysis supports the hypotheses that the impact of such structural changes on government decision-making on PARl is non-linear and conditional on other factors. Regarding the impact of political institutions, the results suggest that more democracy neither leads to more distortionary transfers (agricultural protection), nor to lower investment in public goods (PARI).

Sensitivity of Univariate AR(1) Time-series Forecasts Near the Unit Root

We consider the linear time-series model yt=dt+ut(t=1,...,n), where dt is the deterministic trend and ut the stochastic term which follows an AR(1) process; ut=ut-1+t, with normal innovations t. Various assumptions about the start-up will be made. Our main interest lies in the behaviour of the l-period-ahead forecast yn+1 near =1. Unlike in other studies of the AR(1) unit root process, we do not wish to ask the question whether =1 but are concerned with the behaviour of the forecast estimate near and at =1. For this purpose we define the sth (s=1,2) order sensitivity measure l(s) of the forecast yn+1 near =1. This measures the sensitivity of the forecast at the unit root. In this study we consider two deterministic trends: dt=t and dt=t+tt. The forecast will be the Best Linear Unbiased forecast. We show that, when dt=t, the number of observations has no effect on forecast sensitivity. When the deterministic trend is linear, the sensitivity is zero. We also develop a large-sample procedure to measure the forecast sensitivity when we are uncertain whether to include the linear trend. Our analysis suggests that, depending on the initial conditions, it is better to include a linear trend for reduced sensitivity of the medium-term forecast.

The Dynamics of Income Growth and Poverty: Evidence from Districts in India

In this paper we examine the dynamics of income distribution pattern in India during post-1991 economic reforms. We consider district-level per-capita income data spreading across agriculture, manufacturing, services, and various constituent subsectors. We find evidence in favour of uniform growth process across sectors and regions, and this has helped to reduce poverty. In particular we find that growth in agricultural income and access to finance are important for reducing poverty.

Active momentum trading versus passive ‘ naive diversification’

We consider a passive 1/N naive diversification strategy which is long in the equally weighted portfolio of stocks feasible for trading and short in the risk-free asset. We then examine the profi…tability, exposures to risk factors, idiosyncratic variance as well as the relation between the momentum and the 1/N naive diversifi…cation strategies. The set of sample stocks that we use to construct the equally weighted portfolio is the same as that for constructing the momentum strategies. We fi…nd that both strategies generate an average pro…t of 1% per month. The differences in raw and risk-adjusted pro…ts between these two strategies are statistically and economically insignifi…cant. These two strategies are independent of each other. The idiosyncratic variance of the momentum strategies is 20 times higher than that of the naive diversifi…cation strategy. The findings are consistent over the period between 1926 and 2005 and various sub-sample periods including the periods examined in Jegadeesh and Titman (1993 and 2001) and in our simulations where we randomly select 10 years for 100 times. The results also hold when we conduct tests in sub-samples where we divide the sample, each month, into two groups of large and small size stocks.

Is India Shining

The popular perception about economic reforms having benefitted only the richer districts of India between 1999/2000 and 2004/2005 is investigated. Using the spatial dynamics of district-level per-capita income it was found that income distribution did not change between the years examined. It is argued that this is because of per-capita income across districts being spatially positively correlated. Physical infrastructure, human capital, and factories are identified as factors responsible for increase in income for both the rich as well as the poor districts. Infrastructure, physical or social, is a key component of growth in India. A policy impact analysis shows development of better drainage and potable water systems has a large impact on income. For the year 2001/02, it was found that for every 1% increase in closed drainage system and potable water, district-level median income increases by 1.39% and 0.21%, respectively.

Functional cointegration: definition and nonparametric estimation

Abstract We formally define a concept of functional cointegration linking the dynamics of two time series via a functional coefficient. This is achieved through the use of a concept of summability as an alternative to I(1)’ness which is no longer suitable under nonlinear dynamics. We subsequently introduce a nonparametric approach for estimating the unknown functional coefficients. Our method is based on a piecewise local least squares principle and is computationally simple to implement. We establish its consistency properties and evaluate its performance in finite samples. We subsequently illustrate its usefulness through an application that explores linkages between stock prices and dividends via a sentiment indicator.

Analysis of hydrodilatation as part of a combined service for stiff shoulder

Background Adhesive capsulitis is a common cause of stiff shoulder and may result in pain and restriction of movement. The study aimed to investigate the role of hydrodilatation of the glenohumeral joint in the management of adhesive capsulitis. Methods Patients referred from the shoulder clinic underwent hydrodilatation under ultrasound guidance. Of 209 referred for hydrodilatation, 163 underwent the procedure and attended follow-up physiotherapy. Outcome measures were available for 118 patients (58 men and 60 women). Mean age of the study group was 52.6 years. Results There was a statistically significant improvement in both Oxford Shoulder Score (OSS) and Disability Arm Shoulder Hand Scores (Quick DASH) in the first 4 weeks after the procedure, which was maintained but not improved to the end of the study period. Patients presenting with pain, those who had a history of steroid injections and older patients all had worse functional scores at presentation. Diabetes (both Type I and II), previous physiotherapy, length of history and whether pain or stiffness, or both, were the predominant symptom did not have any statistical significance at presentation. These factors were not predictors of any statistically significant improvement in functional scores. Conclusions Hydrodilatation results in a significant improvement of symptoms in patients with adhesive capsulitis.

Detecting and Forecasting Large Deviations and Bubbles in a Near-Explosive Random Coefficient Model

This paper proposes a Near Explosive Random-Coefficient autoregressive model for asset pricing which accommodates both the fundamental asset value and the recurrent presence of autonomous deviations or bubbles. Such a process can be stationary with or without fat tails, unit-root nonstationary or exhibit temporary exponential growth. We develop the asymptotic theory to analyze ordinary least-squares (OLS) estimation. One important theoretical observation is that the estimator distribution in the random coefficient model is qualitatively different from its distribution in the equivalent fixed coefficient model. We conduct recursive and full-sample inference by inverting the asymptotic distribution of the OLS test statistic, a common procedure in the presence of localizing parameters. This methodology allows to detect the presence of bubbles and establish probability statements on their apparition and devolution. We apply our methods to the study of the dynamics of the Case-Shiller index of U.S. house prices. Focusing in particular on the change in the price level, we provide an early detection device for turning points of booms and bust of the housing market.

The Sensitivity of Detrended Long-Memory Processes

Long-memory tests are often complicated by the presence of deterministic trends. Hence, an additional step of detrending the data is necessary. The typical way to detrend a suspected long-memory series is to use OLS or BSP residuals. Applying the method of sensitivity analysis we address the of question of how robust these residuals are in presence of potential long memory components. Unlike short-memory ARMA process long-memory I(d) processes causes sensitivity to OLS/BSP residuals. Therefore, we develop a finite sample measure of the sensitivity of a detrended series based on the residuals. Based on our sensitivity measure we propose a “rule of thumb” for practitioners to choose between the two methods of detrending, has been provided in this article.