Rajen Mookerjee

An empirical analysis of the equity markets in China

Abstract This paper subjects the newly established stock markets in Shanghai and Shenzhen to tests of market efficiency, utilizing daily stock price data. Using a battery of tests, the study concludes that there are significant inefficiencies present on both exchanges. These can be traced to the unique structural and institutional problems that plague both exchanges. The study also tests for the presence of seasonal anomalies on both exchanges. The results show that there are significant negative weekend and positive holiday effects, but there is no evidence of a January effect or early January effect.

Macroeconomic variables and stock prices in a small open economy: The case of Singapore

Abstract Using a subset of macroeconomic variables (narrow and broad money supply, nominal exchange rates and foreign currency reserves), that are especially pertinent in the context of a small open economy, this paper tests for the presence of informational inefficiencies in the Singapore stock market. The paper uses the techniques of cointegration and causality together with forecasting equations to test for informational inefficiencies in both the long and short run respectively. The results indicate that three of the four macro variables are cointegrated with stock prices, suggesting potential inefficiencies in the long run. The causality tests and forecasting equations provide conflicting evidence on the informational efficiency of the stock market in the short run. Finally, the implications of these findings at both the macro and micro level are discussed.

Seasonality in returns on the Chinese stock markets: the case of Shanghai and Shenzhen

Abstract This paper investigates seasonal patterns in stock returns on the Shanghai and Shenzhen stock markets. The paper documents several interesting findings. First, unlike studies for other stock markets, the highest daily returns on both exchanges occur on Thursday rather than Friday. Second, price change limits exert an effect on the observed daily pattern of returns. Third, daily stock returns appear to be positively correlated with risk. This result is at odds with the majority of findings for other stock exchanges around the world. Finally, the paper documents other differences in seasonal patterns on the two exchanges.

Dynamics of Government revenues and expenditures in industrial economies

The sources of growth in government revenues and expenditures in 22 OECD countries is addressed. The question of whether the revenue constraint is binding on the growth of government expenditures, or whether the ‘displacement’ effect of expenditure growth is binding is considered. Controls for the effects of the output gap and inflation rate on government revenues and expenditures in each of the 22 countries are presented. A major conclusion is that reductions in spending are essential to reducing budget deficits and controlling government size.

Population growth and global CO2 emissions: A secular perspective

Abstract Considerable scientific effort has been applied to the question of whether worldwide fossil fuel combustion and the resultant emission of CO 2 (as well as emissions of other greenhouse gases) will cause a discernible enhancement of the greenhouse effect in the next century. A more precise understanding of the contribution of human activity to potential global warming ( vis-a-vis natural climatic variability) is of critical policy interest. Surprisingly little research has been devoted to establishing the underlying statistical relationship between human activities and CO 2 emissions. In this paper, we explore the nature of the relationship between global population growth and CO 2 emissions by employing the test of causality developed by Granger on annual data for 1880–1989, as well as more comprehensive error correction and cointegration models. The results suggest a lack of a long-term equilibrium relationship, but imply a short-term dynamic relationship from CO 2 to population growth.

Banking services, transaction costs and international remittance flows

Using a unique data set on the financial sector, this article assesses the impact that financial sector development has on international remittance flows for a sample of 64 countries. The results show that greater financial sector development – as measured by bank branches per 1000 km2 – results in greater remittance flows to a country. However, this study also documents that transaction costs have no impact on remittance flows. This latter finding has important policy implications as reductions in transaction costs are often cited as an important approach to increase remittance flows.

An empirical investigation of corporate dividend pay-out behaviour in an emerging market

The Lintner model of aggregate corporate dividend pay-out behaviour is applied to firms in the private sector in a developing country, India. The findings are that an augmented Lintner model which includes external finance as an explanatory variable explains aggregate dividends better. Possible reasons for this finding are discussed both in the context of India and developing countries in general. Finally, the paper tests to see whether dividend pay-out behaviour can be characterized as rational. While it appears that dividend pay-out behaviour is not rational, which is contrary to recent evidence from the US and Japan, a deeper understanding of the institutional environment in which firms operate suggests that when viewed in that context the observed irrationality may indeed be rational.

Multinational Corporations and Child Labor

Using a sample of forty countries that exhibit a high incidence of child labor, this paper assesses the impact that Multinational Corporations (MNCs) have on the incidence of child labor. Our results show that higher levels of Foreign Direct Investment‐our proxy for the presence of MNCs‐have a beneficial impact on child labor rates, after controlling for other factors. This we hypothesize is achieved through a direct and an indirect channel. Using these channels MNCs pressure host country‐based subcontractors, governments, and labor markets in general. This in turn reduces the incidence of child labor.

Endogenous money in China: Evidence and insights on recent policies

Abstract Using a broad range of macroeconomic variables, including five definitions of money, this paper concludes that money is endogenous in China. This in turn suggests that the authorities in China find it difficult to control monetary growth through indirect levers. This recognition on the part of the authorities, has resulted in a shift in policy actions to control recent inflation.

Export volume, exchange rates and global economic growth: the Indian experience

Analysis of the nexus of Indias export volume, real effective exchange rates and measures of global economic growth is performed using time series techniques of cointegration and causality. The results suggest that India would benefit from a policy of export growth that is managed, rather than stimulated by exchange rate depreciation.