Eliyathamby A. Selvanathan

Foreign Direct Investment, Domestic Investment and Economic Growth in China: A Time Series Analysis

This paper investigates the causal link between foreign direct investment (FDI), domestic investment and economic growth in China for the period 1988-2003 using a multivariate VAR system with error correction model (ECM) and the innovation accounting (variance decomposition and impulse response function analysis) techniques. The results show that while there is a bi-directional causality between domestic investment and economic growth, there is only a single-directional causality from FDI to domestic investment and to economic growth. Rather than crowding out domestic investment, FDI is found to be complementary with domestic investment. Thus, FDI has not only assisted in overcoming shortage of capital, it has also stimulated economic growth through complementing domestic investment in China. Copyright 2008 United Nations University. Journal compilation 2008 Blackwell Publishing Ltd.

Remittances and Economic Growth: Empirical Evidence from Bangladesh, India and Sri Lanka

Abstract In many developing countries, remittance payments from migrant workers are increasingly becoming a significant source of export income. This article investigates the causal link between remittances and economic growth in three countries, Bangladesh, India and Sri Lanka, by employing the Granger causality test under a Vector Autoregression (VAR) framework (Granger, C.W.J. (1988) Some recent developments in the concept of causality. Journal of Econometrics, 39, pp. 199–211). Using time series data over a 25-year period, we found that growth in remittances does lead to economic growth in Bangladesh. In India, there seems to be no causal relationship between growth in remittances and economic growth; but in Sri Lanka, a two-way directional causality is found; namely economic growth influences growth in remittances and vice-versa. The article also discusses a number of policy issues arising from the causality results.

The relationship between foreign direct investment and tourism: empirical evidence from China.

This paper investigates the causal link between foreign direct investment and tourism in China by employing the Granger causality test under a VAR framework proposed by Zapata and Rambaldi (1997). Only a one-directional causality is found from foreign direct investment to tourism. This explains the rapid growth in the tourism market in China during the past decade.

A Note on the Stochastic Approach to Index Numbers

In a recent article, Clements and Izan (1987) used the stochastic approach to index-number theory to estimate the rate of inflation and its standard error. Selvanathan (1988) extended their approach to the prices of groups of goods and to prices within groups. In this note, I apply the within-group results to the U.K. alcohol data. Simulation results show that the estimates are unbiased, but the asymptotic standard errors understate the true sampling variability of the estimates. To overcome this problem, I applied the bootstrap technique to obtain alternate standard errors.

Standard errors for Laspeyres and Paasche index numbers

Abstract In this paper we use the regression approach to index numbers to derive the standard errors for Laspeyres and Paasche index numbers. These standard errors are simple to evaluate. We show that these standard errors are linked to the variability of relative prices. When there are more changes in relative prices, the standard errors are higher.

Consumption patterns of food, tobacco and beverages: a cross-country analysis

This study considers the consumption patterns of food, tobacco, soft drinks, and alcohol in 43 developed and developing countries. Such an analysis is important for policy issues associated with tobacco, alcohol, and soft drinks. The results show that consumers in the developing countries spend a much higher proportion of their income on food than consumers in developed countries. The proportion of expenditure allocated to the other three commodities, tobacco, alcohol, and soft drinks, are similar in the two groups of countries. On average, people around the world allocate about one quarter of their income on food, 2.6% on tobacco, 3.2% on alcohol and 1.2% on soft drinks. The income elasticity estimates reveal that food is a necessity in most countries, while tobacco and alcohol are necessities in most of the developed countries and luxuries in a majority of developing countries. Soft drinks are a luxury in a majority of the developing as well as the developed countries. The own-price elasticities show that demand for all four commodities is price inelastic in all countries.

An econometric approach to the construction of generalized Theil-Tornqvist indices for multilateral comparisons

Abstract The Theil-Tornqvist (TT) index is a well-known index for binary comparisons of cost-of-living and for comparisons of prices, real output and productivity. Caves, Christensen, and Diewert (CCD) propose a multilateral method based on a simple averaging procedure that is consistent and base-invariant. The aim of this paper is to derive the TT, CCD, and a generalized CCD multilateral index (which takes into account a measure of economic distance between the different price and quantity vectors) using an econometric model. The problem of bias in the estimation of the TT index in its multiplicative form is considered and a class of UMVUEs of the indices and their standard errors are derived. A numerical illustration using the price and quantity data for sixty countries from the Phase IV of the International Comparisons Project is also included.

Further Results on Aggregation of Differential Demand Equations

Barnett (1979a, 1981) Theils extending (1971) work, aggregates differential demand equations in absolute (undeflated) prices. This paper extends further these results by deriving aggregate (macro) demand equations in relative prices under stated assumptions. These equations are analogous to the individual consumers (micro) demand equations and the properties of the microcoefricients carry over.

Empirical regularities in South African consumption patterns

This article investigates a number of empirical regularities in the South African consumption patterns. The data support the following empirical regularities: (1) variability in consumption systematically exceeds the variability in prices; (2) law of demand; (3) income flexibility is about −0.5; (4) Engels law; and (5) the demand hypotheses, demand homogeneity and Slutsky symmetry are acceptable. In contrast to the findings for a number of other countries, another important empirical regularity that consumers utility function is additive is rejected for the South African consumers. Based on the implied demand elasticity estimates from the preferred model, it is found that food, housing and medical care are necessities, and clothing, furniture, transport and recreation are luxuries and demand for all the commodities are price inelastic.

Computation of Standard Errors for Geary-Khamis Parities and International Prices: A Stochastic Approach

One of the areas receiving little attention in the past in index-number theory is providing standard errors for the index number estimates. Recently, Clements and Izan and Selvanathan used the stochastic approach to index numbers to derive standard errors for the rate of inflation and Laspeyres and Paasche index numbers. In this article, we use this approach to compute standard errors associated with purchasing power parities computed using Geary-Khamis aggregation procedure in the International Comparisons Project of the United Nations. We assess the quality of the standard errors using Efrons bootstrap technique.