Kanta Marwah

The possibility of nesting South Asia in Asia-Pacific economic integration

Abstract A case for expanded Asia-Pacific economic integration inclusive of South Asia is examined. The methodology and empirical design developed within the framework of a world trade matrix consists of eight regions. These are divided into seven basic regions of single or multi-country groupings from expanded Asia-Pacific integration and one from the rest of the world. The growth of economic cohesiveness within Asia during the past three or more decades is assessed by patterns of trade linkages in various quantitative dimensions through measures of bilateral reciprocity, multilateralism, and market diversification. Entropy indexes of the trade and information matrix are computed and used in the analysis. We find pervasive evidence that China has begun to develop in tandem with Asian partners, but that India and Pakistan have a distance to go to achieve a similar degree of regional involvement.

Lost Productivity and Defense Burden of the Southern Cone of Latin America: A Page from History

An attempt is made to measure the loss of productivity and growth due to excessive military expenditures of five countries in the Southern Cone of Latin America during the 1970s and 1980s. These countries are Argentina, Bolivia, Chile, Paraguay and Peru. A transcendental production function that incorporates a ratio of military expenditures to GDP as a separate input factor is estimated for each country. The elasticity coefficients demonstrate a significant trade-off between military and nonmilitary spending from the supply side. For every one percentage aggregate growth point, growth of military share saps 0.048 in Argentina, 0.013 in Bolivia, 0.043 in Chile, 0.173 in Paraguay, and 0.071 in Peru. A counterfactual new scenario is simulated by reducing military shares of GDP to one percent. The results show that these five countries lost on an average 1.5 percent of growth due to excessive defense burden during 1971-1991.

Economic Aspects of Peacekeeping Operations

The United Nations has been involved in some form of collective security or peacekeeping for many years, with varying degrees of success among its many operational situations. Feelings have been expressed that the United Nations should take a more positive, forceful, and effective role in helping to secure world peace, especially since the end of the Cold War presents an opportunity for a new beginning in this segment of UN activities. This chapter looks into the economic costs and resource requirements for maintaining a standing army of significant strength, one that could conceivably be adequate to the task. On a world scale, the costs are manageable without causing significant stress for the international economy, and the necessary resources can be made available.

Bilateral capital flows and the exchange rate: The case of the U.S.A. vis-a-vis Canada, France, West Germany and the U.K

Abstract After a preliminary test (with generally negative results) of the interest parity assumption, an eclectic portfolio adjustment approach, which determines an exchange pressures variable (under a regime of a managed float) is constructed, for bilateral comparisons between the United States and its major trading partners taken individually. This approach to bilateral capital flows and managed exchange rate determination appears to function reasonably well, as judged by the empirical results. Interestingly, factors specific to individual exchange markets appear to play important roles in explaining bilateral capital flows and cross exchange rates, which would not occur in a Walrasian world, with global market clearing.

Towards Money, Output and Prices: A Capacity View of Inflation (MOP-CAP)

SummaryA model approach to inflation is generated through a newIS-LM analogous synthesis of money, output and prices incorporating several capacity equivalent ratio variables of the product, the factor and the money markets. These variables measure the divergence between the short term demand choices which regulate the actual state of the economy and the long term supply decisions which generate its potential capabilities. Thus, they are indicative of market excesses and shortages, determine the general state of economic expectations and move the entire system. The density of money supply and peak budget relative are the new important ratios introduced and developed in the model. The model identifies stagflation and has been tested by the quarterly data of the Canadian economy.

A model of the Canadian global exchange rate: A test of the 1970s

Abstract A review of the literature indicates that no single exchange rate model has been able to track successfully the movements of the Canadian dollar for both the 1970–1976 period and the period thereafter. The purchasing power parity model, irrespective of whether based on relative wholesale prices, unit labor costs, GNP deflators, or export prices performs very poorly; the monetarist models collapse because of their strict adherence to the purchasing power parity and interest rate parity assumptions; the portfolio demand models require a significant adjustment for the post-1976 period. This paper presents a medium-term eclectic model of the global exchange rate of the Canadian dollar and examines a spectrum of broad issues that reflect on the efficiency of the foreign exchange market of Canada. These issues are basically related to the interest parity assumption, the role of speculation, and the test of rational expectations. The global exchange rate is defined as the value of the Canadian dollar measured in terms of a unit of basket of currencies comprising currencies of France, West Germany, Japan, the U.K., and the USA. The model belongs to the same genre of balance of payments structural models that explain the exchange rates by balancing demand and supply of foreign currencies. The model simultaneously explains both spot and forward rates, and it has been estimated and tested by using the quarterly data for 1971–1981.

The Military-Civilian Tradeoff in Guatemala: An Econometric Analysis

There is a general supposition that a high degree of militarization competes with general economic advancement in the civilian sector of an economy. In order to examine this supposition in a quantitative and detailed fashion it is necessary to consider simultaneously the following effects or economic adjustments to the military situation: (a) the demand side, (b) the supply side, (c) the short-run, and (d) the long-run. The idea of simultaneous consideration means that both direct and indirect effects must be taken into account.

A prototype model of the foreign exchange market of Canada: Forecasting capital flows and exchange rates

Abstract A balance-of-payments structural model of the foreign exchange market of Canada, endogenizing capital flows, the spot and forward exchange rates and the entities of the monetary sector, is developed using quarterly data for 1971–81. The capital flows have been disaggregated into ten categories and the exchange rates of the Canadian dollar have been analysed against five major currencies. While the model does not adhere strictly to purchasing power or interest rate parity, it does recognize them and it also incorporates other economic fundamentals, expectations and risk. Government interventions, although generated endogenously, are quantified implicitly and globally. The model tracks the post-Bretton Woods in-sample experience and generates ex post predictions reasonably well.

Trends in macroeconomic modeling: The past quarter century☆

Abstract Macroeconometric model-building is now over half a century old. Econometric models of the Dutch economy were first built by Tinbergen in the middle of the 1930s, and Tinbergens first model of the U.S. economy predates the outbreak of hostilities in the Second World War. Nevertheless, macroeconometric models have continued to evolve, sometimes in a spectacular manner, during the past quarter century. In this paper, we take a broad picture and examine eight trends that seem to us particularly important in explaining developments in this field. These trends are: (1), large scale modeling; (2), use of a team approach; (3), development of an institutional framework independent of the models originator or originators; (4), the continuing revolution in computing technology; (5), increasing theoretical sophistication; (6), increased orientation towards forecasting uses; (7), increased orientation towards policy issues; and (8), internationalization of macroeconometric model-building. Finally, we explore some prospective developments in this field, up to the end of the current century.

A History of Macroeconometric Model-Building

This major book presents, for the first time, an authoritative history of developments in macroeconometric modelling since the 1930s. It focuses in particular on the construction of mathematico-statistical models of entire economies, estimated from national accounts and other macroeconomic data. International and comparative in scope, the book contains chapters prepared by specialists from the different countries concerned. This landmark book is indispensable to an understanding of the history and development of large scale econometric models of modern economies.