Moid U. Ahmad

Effect of Low and Negative Interest Rates: Evidence from Indian and Sri Lankan Economies

Abstract Interest rates are critical to any economy. Usually the central bank of a country supervises and tries to control the interest rates but there is always an element of uncontrollable effects: local or international. A central bank adopts a monetary strategy to affect various macroeconomic parameters such as inflation, exchange rate (ER), economic growth and many others. A country may decide to adopt Ultra-low Interest Rate Policy (ULIRP) or Negative Interest Rate Policy (NIRP) or a policy with moderate/high rate of interest. In today’s global business scenario, economies are connected and influence one another. The US and UK economies have seen a very low and negative interest rates historically, at least in recent past. Indian and Sri Lankan economies are integrated with the US and UK economies and thus are affected by their prevailing interest rates. The effect of low and zero interest rate policy of a country (USA and UK) on interest rates and economy of co-integrated economies (India and Sri Lanka) have been studied in this research. The objective of this study is to understand the implications of ULIRPs and NIRPs in the context of Indian and Sri Lankan economies. Two significant conclusions of the research are that Indian and Sri Lankan economies are affected by the US and UK policies and that they are affected at a lag of eight years.

Does CRR and Repo Change Affect Corporate Output

Bank financing is an imperative component of financing the companies. When banks are short on liquidity, this financing activity also tends to go slow. Banks liquidity is dependent upon the policy enforced by the central bank which uses cash reserve ratio (CRR) and Repo rates very frequently to this effect. Since bank credit is dependent on its liquidity position, any change in key policy rates will affect the corporate funding. This is the basic hypothesis which is being tested in this research. The objective of the article is to understand the effect of two important policy rates, Repo and CRR, on corporate output through aggregate sales of the listed companies. The objective was achieved by building a VAR system and doing the required analysis using quarterly data for the time period 2000–2015. One of the important findings was that lag effect is very critical to understand this relationship between policy rates and corporate output and while formulating policies, this should be an important variable to be considered.

An Analysis of the Effectiveness of Monetary Policy Changes

One of the key roles of the Reserve Bank of India or any central bank is to ensure economic stability in the country. For the purpose, the central bank adopts various measures to ensure that the inflation rates, interest rates, exchange rates and money supply remains under control. It uses tools like Cash Reserve Ratio and Repo rates to control liquidity and inflation in the country. The effectiveness of such policy rates in ensuring economic stability needs to be verified and tested. The decision maker needs to understand the effect of these changes on the affected variable. This given research is such an attempt to test and verify the effectiveness of the changes in monetary and policy rates on the desired critical factors. The research is aimed to provide inputs to decision makers in formulating monetary and economic policies and contributes to the limited existing literature on the subject.

Another Entrepreneurial Venture Fails to See the Light of the Day Understanding Why

The entrepreneurial journey for a young and aspiring entrepreneur and that too from a middle class family, is triggered for a variety of reasons but has its own share of crests and troughs. It requires a strong will and character on the part of the entrepreneur to sustain the momentum and once too often we see a start-up die a premature death, leaving the protagonist thinking- what went wrong? This case is about one such young entrepreneur, who motivated by the success of his role model, launches an enterprise only to see it wither away in quick time. In trying to understand why it happened, we trace the entrepreneurs’ background, the antecedents of his taking the entrepreneurial route and the reasons why the enterprise could not be sustained. We also make an attempt to see if the failure of the first shot at entrepreneurship deters an individual to start another one.

Managing the Network: The Case of a Micro-Enterprise:

Apart from land, labour, capital and technology, any entrepreneurship venture involves efficient use of networks which may be for generating business or increasing the efficiency in business processes. The given case is one such compilation of data about an entrepreneurship venture where the protagonist uses the concept of networks in business. The business model used by him has been successful in short term but he is apprehensive of its utility in long term, especially in the light of the problems which he is currently facing. This entrepreneur operates a micro enterprise located in a backward district of India and uses his networks to start a business. The case discusses the application and utility of supply chain networks in microenterprises. The basic objective of the case is to provide for discussions to the problems this business is facing with a focus on the business and not the entrepreneur. This involves a study of the business model in practice by the protagonist as of now, the problems faced by the business and related present and future issues.

A Comparative Study of Indian Indices with a Focus on Shariah Indices

The question of Islamic economy being a social economy rather than a viable economy has been raised and debated time over time. To prove the viability of Islamic financial system as an alternative to the interest based financial system, it is an imperative to prove its commercial viability over the modern financial system. To provide Islamic economics as an alternative to modern financial system, its viability, application and logic needs to be studied and empirically tested. This study is an empirical attempt to verify the application of the concepts and beliefs of Islamic finance in various investment avenues, including Shariah and non Shariah investments. It attempts to compare and study the returns from Shariah and non-Shariah investments by taking relevant indices as a proxy for respective markets.