Hrushikesh Mallick

Examining the Linkage between Energy Consumption and Economic Growth in India

The paper examines whether energy use drives economic growth or vice versa in the Indian context during 1970–71 to 2004–05. Utilizing Granger causality test, the study suggests that it is the economic growth that fuels more demand for both crude oil and electricity consumption and it is the only growth of coal consumption that drives economic growth. When influence of different components of energy on major two components of economic growth is investigated with the same causality test, none of the energy components found to be significantly influencing the two components of economic growth viz. private consumption and investment. In contrast, the variance decomposition analysis of Vector Autoregression (VAR) suggests that there could be a bidirectional influence between electricity consumption and economic growth, other results remaining unchanged. Therefore, the study yields mixed and contradictory result compared to the previous studies in the Indian context. However, on the basis of application of two econometric tools, the study with little more conviction suggests for reducing crude oil and natural gas consumption at least in the consumption sectors, which don’t directly contribute to production or add to capital formation of the economy, for achieving higher rate of growth in the economy.

What Causes Asset Price Bubble in an Emerging Economy? Some Empirical Evidence in the Housing Sector of India

This study examines the dynamic causal relationships between house prices and their five determinants – real income, short-run real interest rates, real stock price index, real effective exchange rate, and real non-food bank credit – by using the quarterly data from 1996:Q1 to 2007:Q1 for India. Using the cointegration test and the vector error-correction model (VECM), the study finds that in the long run, real income significantly and positively influences the housing prices while real non-food bank credit adversely influences it. The variance decomposition results suggest that it is the shocks to the non-food bank credit that mainly explains the variability in housing prices, besides its own shocks being the most influential while other factors are not significant. This suggests that the role of credit availability as a supply side determinant cannot be underestimated in the dynamic behaviour of housing prices in emerging economies.

Energy Consumption, Economic Growth and Financial Development: Exploring the Empirical Linkages for India

This study investigates the relationship between energy consumption, economic growth and financial development in India by using the annual data for the period 1971–2009. An application of Auto Regressive Distributed Lag (ARDL) approach to cointegration results suggest that energy consumption is positively and significantly impacted by proportion of urban population in total population, while the same is negatively and significantly impacted by financial development, economic growth and proportion of industrial output in total output. The cointegration results also further suggest that an increase in proportion of urban population adversely influences economic growth, whereas energy use positively influences economic growth. The findings have significant policy implications for the Indian economy as we find energy use positively impacts on economic growth, suggesting that India is harnessing on the effective use of energy. However, it is recommended that India needs to be cautious in the effective use of energy in proper channels.

IMPACT OF REAL INTEREST RATES ON REAL OUTPUT GROWTH IN INDIA: A LONG-RUN ANALYSIS IN A LIBERALIZED FINANCIAL REGIME

The study attempts to evaluate the impact of short-term real interest rate on growth rate in India in a liberalized financial and trade regime (March 1993 to March 2005). Using ARDL approach to cointegration of Pesaran and Shin (1999), the study finds that interest rate does not have a direct impact; rather, it may have an indirect and adverse impact on growth rate through the transmission channel of bank credit, thereby neither supporting the arguments advocated by Keynesians nor the explanations offered by the proponents of Financial Liberalization School. This incredible result may be attributed to the poor quality of credit disbursal of the banking system in India or low credit offtake for productive investment purposes as investment, an important determinant of economic growth, is governed by several other factors.

Factors determining regional housing prices: evidence from major cities in India

Using quarterly data (2010Q1–2013Q4), the study makes an initial attempt to explain the housing prices for 15 major cities of different regions in India. The overall result demonstrates that there is a dominance of fundamental factors over the non-fundamental factor (speculative factors) in explaining the regional housing prices. Further, among the fundamental factors, it is observed that the share price index, non-food bank credit and foreign direct investment positively explain the housing prices, while inflation rate and a partial measure of wealth (i.e. market capitalisation) negatively explain the same. The price of gold, real effective exchange rate and net portfolio investments don’t have any influence on the housing prices. This could to some extent signify a lack of market integration among various asset markets in the Indian situation. This might also be the reason for the lesser role of speculative factors in the Indian housing market.

Inflation and growth dynamics: the Indian experience

This study investigates the impact of inflation on economic growth in India during the period 1960 to 2005. Applying cointegration procedures, I find that inflation rates have a significant adverse impact on economic growth while investment has a favorable impact. This suggests a policy of targeting price stability is desirable to achieve a higher rate of economic growth in emerging markets.

INFLOW OF REMITTANCES AND PRIVATE INVESTMENT IN INDIA

Examining the impact of remittances on private investment, the study finds that remittances have an adverse impact on private investment and hence is apprehensive about its net positive impact on output growth in India. Therefore, the study suggests that the government policy should be designed toward inducing private sector to allocate more remittances for investments for leveling up the rate of economic growth. Otherwise, a significant proportion of remittances would result in increase in private consumption without desired contributory impact. The study also observes crowding out impact of public sector investment, while openness measure raises private sector investment.

Determinants of workers’ remittances: An empirical investigation for a panel of eleven developing Asian economies

We explore the key motives of migrant workers’ remittances from abroad for 11 major Asian migrant-sending countries. Using panel regressions, we find that relative higher growth rate, interest rate and capital market returns of home over the host, investment, financial deepening at home have significant impact on remittance inflows into Asia, along with higher per capita incomes and international crude oil prices. With incorporation of per capita incomes and lagged impact of remittances, we observe an emergence of consumption motives to remit. Therefore, we conclude that both investment and altruistic motives are the driving forces for remittances inflows into the Asian economies.

Fundamental or speculative factors in the housing markets of emerging economies? Some lessons from China

Using quarterly data, 1999:Q2–2009:Q3, we empirically examine the key macro determinants of housing prices for China’s residential market. Employing Granger causality and Vector Auto-Regression (VAR) models, we find that there exists strong bivariate causality between house price increases and its determinants. The variance decomposition suggests that speculative factors reflected by past increases in real house price contribute a relatively larger proportion to house price rises relative to fundamental factors.

Is skewed income distribution good for environmental quality? A comparative analysis among selected BRICS countries

A large number of studies have examined the linkage between income inequality and environmental quality at the individual country levels. This study attempts to examine the linkage between the two factors for the individual BRICS economies from a comparative perspective, which is scarce in the literature. It examines the selected countries (Brazil, India, China and South Africa) by endogenising the patterns of primary energy consumption (coal use and petroleum use), total primary energy consumption, economic growth, and urbanisation as key determining factors in CO2 emission function. The long-run results based on ARDL bounds testing revealed that income inequality leads to increase in CO2 emissions for Brazil, India and China, while the same factor leads to reduction in CO2 emissions for South Africa. However, it observes that while coal use increases CO2 emissions for India, China and South Africa, it has no effect for Brazil. In contrast, the use of petroleum products contributes to CO2 emissions in Brazil, while the use of the same surprisingly results in reduction of carbon emissions in South Africa, India and China. The findings suggest that given the significance of income inequality in environmental pollution, the policy makers in these emerging economies have to take into consideration the role of income inequality, while designing the energy policy to achieve environmental sustainability.