Syed Zahid Ali

Supporting Pakistani Farmers Through Digital Means: An Exploratory Study

This study identifies the core agricultural information needs of the farmers of central Punjab. A lean model is adopted to develop an image based touch application with minimal text to deliver information such as weather forecast, pesticides and fertilizer information. The usage of the application was then evaluated and results show that such an application is a viable option to deliver agro-information.

Productivity Bias Hypothesis: Evidence from South Asia

Most existing studies have attempted to test the productivity bias hypothesis by making use of the cross-section data. This article utilizes country-level time series data from Penn World Tables to examine the productivity bias hypothesis for five South Asian economies (namely, Bangladesh, India, Nepal, Pakistan and Sri Lanka). We make use of Johansen’s cointegration approach and vector error correction modelling. The empirical analysis presented in this article shows that purchasing power parity theory holds for all countries considered. However, the productivity bias hypothesis appears to hold only in the case of Bangladesh and Nepal.

Exogenous shocks and exchange rate management in developing countries: a theoretical analysis

Even though globalization benefits less developed countries (LDCs), it also makes them more vulnerable to the exogenous shocks to the economies. Many LDCs rely on imported technologies and intermediate inputs to compete in the international export markets with better quality and cost efficient products. In this regard, exchange rate policies in respective countries have a direct bearing on the cost of production. This paper examines alternative exchange rate regimes to suggest an appropriate exchange rate policy in the context of developing countries. The paper utilizes a small open economy model involving direct supply-side effects of exchange rate and expectations of key economic variables and considers four possible exchange rate policies, e.g., fixed exchange rate, perfectly flexible exchange rate, leaning against the wind, and leaning with the wind. Contrary to the conventional wisdom, the paper finds that in the event of a shock, leaning against the wind is likely to be the most appropriate exchange rate policy. Moreover, in the event of rigid wages, a fixed exchange rate policy is advisable.

Supply Side Shocks, Near Rational Expectations, Cost Channel, and Monetary Policy

This paper examines the effectiveness of interest rate policy to stabilize the economy in general and to control inflation in particular. The paper utilizes a dynamic model which has firmer microeconomic foundations. The model is used to establish links between inflation and other variables such as wages, interest rate, and expected output. The paper highlights the importance of supply-side effects of interest rate and the role of near rational expectations in determining both nominal and real variables. The dynamic model is used to calculate the impulse response function and welfare loss to the society. The impulse response emanating from supply-side shock was used to examine various interest rate polices. Interest rate policies were distinguished based on their ability to control inflation and minimization of the overall welfare loss. This paper supports the policy of inflation targeting. It is further argued that it is unwise to increase interest rate in line with inflation as suggested by the Taylor rule.

Inflation and Interest Rate Policy

By making use of a dynamic model, this paper examines the effectiveness of the interest rate policy to control inflation. The model utilized in this paper considers both demand and supply side effects of interest rate. These effects are used to derive the relevant impulse response functions and welfare loss to the society associated with supply side shocks. The paper compares three policies to control inflation; (i) monetary policy with commitment, (ii) Taylor’s rule, and (iii) inflation targeting. These policies are distinguished based on their ability to control inflation and minimization of the overall welfare loss to the society. We argue that in the presence of a cost channel it is imperative that interest rate policy should be used with restraint.