Hiranya K. Nath

Export-led growth in Bangladesh: a time series analysis

This article examines time series evidence to investigate the link between exports and economic growth in Bangladesh. Using quarterly data for a period from 1976 to 2003 the article finds that industrial production and exports are cointegrated. The results of an error correction model (ECM) suggest that there is a long-run unidirectional causality from exports to growth in Bangladesh.This article examines time series evidence to investigate the link between exports and economic growth in Bangladesh. Using quarterly data for a period from 1976 to 2003 the article finds that industrial production and exports are cointegrated. The results of an error correction model (ECM) suggest that there is a long-run unidirectional causality from exports to growth in Bangladesh.

Size, Structure and Growth of the U.S. Information Economy

This paper presents the results of our empirical research in measuring the size and structure of the U.S. information economy in 1992 and 1997, and in assessing the growth experienced by different industries and sectors since Porat’s research on the U.S. information economy in 1967. The study indicates that the share of the information economy in total GNP grew from about 46 percent in 1967 to about 56 percent in 1992, and to 63 percent in 1997. The study further indicates that during this time period the share of service sector information activities in total GNP increased substantially, while the shares of non-service sectors declined correspondingly. The industries displaying the highest growth rates include business services, and medical and educational services. The paper also provides a critical assessment of Porat’s methodology and suggests specific improvements that may be made to obtain a more plausible measure of the size and structure of the information economy.

Information Services in the U.S. Economy: Value, Jobs and Management Implications

Most of the large economies in the world are dominated by services, in that services compose more than 50% of their GDP. Even in India, where most of the employment (60%) is in agriculture, services contributed just over 60% of the GDP in 2005. An exception is China, where the industrial sector is still larger than the service sector. However, this could be a matter of reporting conventions; for example, construction is not included in the service sector in the Chinese figures. For developed economies, the trend to services is very far along with many of them past the 70% mark, and every other economy out of the largest 25 is either past 50% mark, or has services as the largest sector. It seems that even when manufacturing or agriculture play large roles for a country, no economy of any size can really function without a large service sector.

Workers’ Migration and Remittances in Bangladesh

Bangladesh has sent more than 6.7 million workers to over 140 countries during a period of more than three decades since the mid-1970s. Most of these workers temporarily migrate to work in Middle East and Southeast Asia. This mass movement of temporary migrant workers has, to some extent, eased unemployment pressures on the over-burdened labor market in this highly populated country. More importantly, the remittance transfers received from these migrant workers have reached a phenomenal level of over 10 billion US dollar in 2009, approximately 12 percent of GDP in Bangladesh. This paper analyzes the trends and various other aspects of workers’ migration and remittances in Bangladesh. It further discusses the micro and macroeconomic impacts of remittances. While most remittance transfers have been used by migrant-sending households for consumption, there is evidence to show that these transfers have helped reduce poverty in Bangladesh. The analysis presented in this paper further indicates that these remittances may have significant effects on other macroeconomic variables as well.

Relative Importance of Sectoral and Aggregate Sources of Price Changes

This paper estimates a dynamic common factor model to assess relative importance of the aggregate and the sector-specific factors that determine changes in the prices of individual products. It also examines how aggregate price changes are affected by these factors. Two different specifications of the model are estimated: the baseline model with one aggregate factor, and a second specification with two aggregate factors. In the one-actor model, the aggregate factor contributes little to the movements of changes in prices, mostly of nondurable goods whereas it seems to have important contributions to the movements of changes in prices of commodity groups mainly used as intermediate or capital goods. In the specification with two aggregate factors, the additional factor has significant effects on changes in prices of ‘farm products’ and ‘processed foods and feeds’ only. Forecast-error variance decompositions of both aggregate and disaggregate price changes suggest that sectoral factors account for most of the variability at short horizons while the contributions of the aggregate factors increase as the time horizon lengthens. The results also show that sectoral factors are not only important for relative price changes but also have significant impact on aggregate inflation. The estimated common factors have statistically significant correlations with money growth and changes in the unemployment rate.

Inflation and Relative Price Variability in Mexico: The Role of Remittances

This article derives generalized impulse responses from the estimation of a vector autoregression (VAR) model using monthly data between 1995 and 2005 for Mexico, to examine the inflation–relative price variability (RPV) relationship, and to investigate if remittances could account for the observed relationship. While the positive relationship between inflation and RPV is a robust result, remittances are found to have significant positive effects on both inflation and RPV. These results are interpreted as providing evidence in support of our intuition that remittances could be responsible for generating a positive relationship between inflation and RPV.

Information and Communications Technology (ICT) and Trade in Emerging Market Economies

We examine the effects of information and communications technology (ICT) on international trade in emerging markets. Using panel data for forty emerging market economies (EMEs) from 1995 to 2010, we estimate fixed effects models of exports and imports with ICT as the main explanatory variable of interest. The empirical results overwhelmingly suggest that Internet subscriptions and Internet hosts have significant positive effects on both exports and imports in EMEs. Thus, the trade-enhancing effect of ICT does not depend on ICT infrastructure or ICT capability per se but on its use. This result is robust to a number of sensitivity checks.

Country Risk Analysis: A Survey of the Quantitative Methods

With globalization and financial integration, there has been rapid growth of international lending and foreign direct investment (FDI). In view of this emerging trend, country risk analysis has become extremely important for the international creditors and investors. This paper briefly discusses the concepts and definitions, and presents a survey of the quantitative methods that are used to address various issues related to country risk. It also gives a summary review of selected empirical studies that use these techniques. While these studies display a distinct chronological pattern of gradual improvements in terms of technique and analytical competence none of them is adequate in terms of its scope and coverage. This paper also notes that in view of changing global economic and financial environment, greater availability of quantitative data, and enhanced computing capacity, the researchers should focus on the possibility of applying better techniques to more extensive model of country risk analysis.

Structural Breaks and Relative Price Convergence among U.S. Cities

This paper examines price index convergence among U. S. cities by applying panel unit root test procedures that allow for structural breaks to annual CPI data between 1918 and 2010 for 17 major cities. With an endogenously determined single break in 1985, and two breaks in 1943 and 1990 respectively, the test results provide overwhelming evidence of convergence of relative prices across cities, which is consistent with the existing literature. Most importantly, this study finds that the speed of convergence with structural break(s) is much faster than that reported by previous panel studies with no structural break. Furthermore, correcting for small-sample bias (the so-called “Nickell Bias”) and time aggregation bias generates a half-life of 2.8 years with two breaks, which is 74% shorter than the half-life estimate with no structural break and no bias correction. These results highlight the importance of structural break(s) and bias correction in obtaining reasonable panel estimates of the half-life to relative price convergence among U. S. cities.

Comparative Advantages in U. S. Bilateral Services Trade with China and India

Using bilateral trade data for 16 service categories, this paper examines the patterns, evolution, and determinants of comparative advantage (CA) in U.S. services trade with China and India from 1992 to 2010. The results indicate that the U.S. has a CA in most services, except in more traditional ones, such as travel and transportation. However, India, and more recently China, gained a CA in modern services, such as computer and information services during the period considered in this paper. An examination of the distributional dynamics indicates that the likelihood of U.S. gaining CA over an initial position of comparative disadvantage (CDA) in its trade of a particular service with India is higher than the probability of losing its initial dominance. In contrast, the U.S. CA or CDA vis-a-vis China exhibits high levels of persistence over time. The regression results suggest that relative abundance of sector-specific labor, human capital, and FDI inflows have been significant sources of CA for the U.S. over both China and India.