Exchange rate behavior of Great Britain during 1960-2010

The official exchange rate of U.K. with respect to US dollar during last 40 years behaves more or less like other countries of EU and Asia because it shows volatility. If we use co-efficient of variation as the very simple measure of volatility , then we got the value of 22.16% which is too high. In the Fig-1, the volatility of the exchange rate is given.

                                             Fig-1, Official exchange rate of UK per US dollar

In contrast to the behavior of the official exchange rate of UK per US dollar, the nature of the REER of UK during 1975-2009 is plotted below.

                                           Fig-2, REER of UK

This REER (2005=100) is found as cyclical having co-efficient of variation is 9.6572% ie less volatile than the level series data. It is linearly estimated as,

REER = 80.8878+0.4293 T+U

               (31.994)*(3.539)*

R²=0.275 , F= 12.53 (significant) and   * = significant at 10% level.

On the other hand, the linear estimated equation of the level series of exchange rate is given below.

EX.RATE =0.38009+0.005913t +u

                   (16.69)*(7.759)*

R²=0.551 , F=60.21(sig) , where * = significant at 10% level.      

The REER  is positively skewed (value = 0.13007) but the level series is negatively skewed(value = -0.0843).

The long run trend of the curve is estimated in the linear form is shown in the figure-3, and the nature of the actual exchange rate curve is also shown and it is cyclically upward.

                       Fig-3 , Estimated series of exchange rate 

The exchange rate shows auto-correlation and partial auto-correlation problems.In the Table-1,the correlogram of auto-correlation and partial auto-correlation are given along with the values of auto-correlation and partial auto-correlation along showing Q statistic and probabilities for significance.

Table-1

Correlogram of exchange rate series

Date: 10/02/11   Time: 16:21
Sample: 1960 2010
Included observations: 51
Autocorrelation	Partial Correlation		AC	PAC	Q-Stat	Prob
. |*******|	. |*******|	1	0.892	0.892	43.055	0.000
. |****** |	***| .     |	2	0.730	-0.327	72.446	0.000
. |*****  |	. |*.     |	3	0.593	0.112	92.250	0.000
. |****   |	. |*.     |	4	0.512	0.133	107.35	0.000
. |****   |	. | .     |	5	0.470	0.036	120.33	0.000
. |****   |	. |*.     |	6	0.472	0.195	133.69	0.000
. |****   |	. |*.     |	7	0.494	0.068	148.66	0.000
. |****   |	.*| .     |	8	0.484	-0.120	163.40	0.000
. |***    |	.*| .     |	9	0.417	-0.142	174.58	0.000
. |**     |	.*| .     |	10	0.311	-0.104	180.95	0.000
. |**     |	. | .     |	11	0.216	0.018	184.11	0.000
. |*.     |	. | .     |	12	0.149	-0.036	185.65	0.000
. |*.     |	.*| .     |	13	0.091	-0.138	186.24	0.000
. | .     |	. | .     |	14	0.050	-0.020	186.42	0.000
. | .     |	. | .     |	15	0.036	0.047	186.52	0.000
. | .     |	. | .     |	16	0.025	-0.039	186.57	0.000
. | .     |	. | .     |	17	-0.009	-0.036	186.58	0.000
.*| .     |	**| .     |	18	-0.088	-0.196	187.21	0.000
.*| .     |	. | .     |	19	-0.168	0.003	189.60	0.000
**| .     |	.*| .     |	20	-0.250	-0.149	195.06	0.000
***| .     |	.*| .     |	21	-0.329	-0.111	204.79	0.000
***| .     |	. |*.     |	22	-0.367	0.114	217.34	0.000
***| .     |	. |*.     |	23	-0.338	0.124	228.38	0.000
**| .     |	. | .     |	24	-0.276	0.044	235.99	0.000

The exchange rate of UK from 1960 to 2010 does not face unit root because from the unit root test we found the value of Augmented Dicky Fuller (ADF)which is -3.2857 and found  significant at 10% level.

The estimated unit root test is,

X _t-1 = 0.1006 – 0.2489 + 0.4794 ∆X _t-1+u

              (3.24)*  (-3.2857)*   (3.665)*

  R²= 0.2969, ( moderately  low), F= 6.334(insignificant),   where * = significant at 10% level.

But, the exchange rate series has no common variance and therefore, the Auto Regressive Common homoscedasticity test appeared to be significant where  Observed R2= 24.041(low but significant) ,F=44.456(sig) in which the estimated values are:

Constant              0.001929 (t= 1.41 , insignificant)

Residual               0.6932 (t= 6.66,significant)

Moreover, the series contains  heteroskedasticity  where the value of log likelihood ratio was found as 24.53(significant) from the Ramsey Reset Test.

So, we have to face numerous exchange  rate  policies for stabilization. The falling REER is the condition for net gain in terms of trade and positive current account balance. The stability of exchange rate with inflation targeting policy is crucial and to be adjusted with LIBOR and interest rate of EU for good behavior of exchange rate of the economy. Any interest rate differential is to managed by monetary policy.

TWO DECADES OF ECONOMIC REFORMS IN INDIA

Bengal Economic Association has organized the Mid-Year Seminar on 24th September in 2011 at Michael Madhusudan Mahavidyalaya,Adra,Purulia,WestBengal on the theme “ Two Decades of Economic Reforms in India”. 27 paper presenters attended the seminar so far.

The key note Paper entitled “Two decades of economic reforms in India” was presented by Prof.Raj Kumar Sen,former President of BEA. He highlighted on jobless growth,neglect of investment in agriculture,adverse impact of green revolution,corporate-led MNC dominated process like SEZ,contract farming,etc, and the accumulation black money and rising inequality.

The theme paper entitled “Two decades of Economic Reforms-The Indian Economy” was presented by Dr.Asim Kumar Karmakar-the Assistant Prof. of Economics of Jadavpur University. He focused on several issues like BOPs crisis,debt problem,trade policies,non-competitiveness etc.

Prof.Dhirendranath Konar of Kalyani University expressed the declining agricultural contribution ,rural poverty and inter-state disparity on his paper “Economic Reforms:Its impact on rural poverty in India during the last twenty years”

Dr.Purba Chattopadhyaya of Gobardanga Hindu College examined the basic health indicators like nutritional indicators,anemia,reason for Indian children’s sufferings and infant mortality rate etc. which predict a gloomy future.

Anath Bandhu Mukhopadyaya of SRF College,Beldanga(retd) spoke about multidimentional implications  of Indian Economic Reform which was originated through Washington Consensus.

Dr.Debesh Bhowmik of International Institute for Development Studies(Kolkata) on his paper , “India’s Renewable Energy:Achievements and Targets” emphasized on different sources of renewable energy in India during last two decades and showed long term projection up to 2040.He showed that India ranks 5^th in wind power and also ranks 5^th in world renewable energy.He clarified the importance of India’s trade in renewable energy.But he did not forget to show the gloomy picture of solar energy and nuclear energy in India.He hopes that India will improve its status in the world in renewable energy by implementing new climate policy ,new energy policy and long term perspective plan where a great potentiality of green jobs may emerge.

Debes Mukhopadhyaya of St.Pauls CMCollege,Kolkata(retd) emphasized on inequality, organized employment potentiality,governance deficit and development deficit etc and said that economic democracy and political democracy is far wide off the mark.

Rajat Sarker –a PG student of Jadavpur University analysed on India’s foreign direct investment.

The same was emphasized by Dr Swapan Kr Roy and Suhas Roy of Bethuadahari College,Nadia.

The prospect of service-led growth in India was studied by Ankita Das of Kolkata.The globalization and non-agricultural economic reform at last decades in urban India was narrated by Samarjit Das –the urban planner,Dumdum municipality.Hiranya Lahiri –a PhD scholar of Jadavpur University analysed the reform in 4 phases,eg 1993-95,1996-98,1999-2003and 2004 onwords .Under 1^st phase,tight peg with dollar,high inflation,loose monetary condition were found.High rupee volatility,lower inflation and tight credit were foundin the 2^nd phase.In the 3^rd phase,inflows of fdi, sterilized intervention,rupee depreciation,fuel price inflation were visited.4^th phase showed fuel and food inflation,currency flexibility and mixed monetary stance.Debalina Chakraborty –a research scholar of Jadavpur University focused on demand side management policy and examined how electricity reform in India managed to control huge unmet demand for electricity of end users.Shyamasree Dasgupta of the same capacity,showed that the pathways of development of both industrial and environmental policies directed towards iron and steel sector in India during last 50 years and found that composition and policy of the sector changed significantly.Chandreyee Gupta and Sanchita De –PG students of Jadavpur University, concentrated on the direction of change in exports and imports of India.Abhishek Das-a PhD scholar of JU, verified that inflation and interstate income disparity are positively related and there exist a bi-directional causality between them during 1980-81-2007-08.Dr.Biswajit Guha of Netajinagar Day College emphasized on problem of exclusion in India’s economic reform.    Dr.Dhiraj Kumar Bandopadhyaya of Calcutta University investigated the two way link between economic growth and human capabalities and explored possibilities of vicious cycle,virtuous cycle,lopsidedEG and lopsided HC and then classified the states into these categories.Bratati Dasgupta of Jogesh Chandra College ,Kolkata emphasized on urban co-operative banks in India.

Prof Debdas Ganguli of HIT,Haldia and Dr.Pankaj Basu of Naihati, studied over the process of corporate restructuring and along with this tries to identify if reforms in Indian money market and Indian capital market are basic forces to have any role in this process of corporate restructuring. Dr.Debashish Mukhopadhyaya of BNMahavidyalaya,studied on economic reforms in acreage response function of selected vegetables in WestBengal.Dr.Madhumita Sengupta of Malda College analysed the reforms in financial systems in two decades and found integration with the world.Anusuya Kar –Assistant prof. of Netaji Nagar College,showed declining agricultural growth and employment.Dr.Jayanta Hazra of JKCollege of Purulia,said about the declining economic status of Purulia and emphasized on industrialization in Purulia to revive the district.Dr.Suvranshu Pan-Assistant prof. of MMMahavidyalaya highlighted on the composition and trends of various types of capital flows during last twenty years in India.Dr.Saroj Upadhyaya and Dr.Niladri De of EIILM,Kolkata examined the changes in banking sector especially in capital adequacy norms,prudential regulations,asset classifications,stricter regulations on NPA management etc.Dr.Anil Kumar Thakur-the Secretary and Treasurer of the Indian Economic Association was the chief guest and gave his good wishes to all.  

COMMON PROPERTY RESOURCES

Kashipur Michael Madhusudan Mahavidayalaya ,Adra,Purulia,West Bengal organized a seminar on “Challenges of Common Property Resources” during 22-24 September,2011.It was an UGC sponsored seminar. Fourteen participants presented  their papers . Prof.Raj Kumar Sen-former president of Indian Economic Association and Bengal Economic Association presented his paper on “Common Property Resources in India with reference to forests:Some current issues” where he emphasized on NSS 54^th round data on CPR and also showed its adverse sides.He also,noted the role of CPR for tribal in forest.

Prof.Biswajit Chatterjee of Jadavpur University and President of Bengal Economic Association presented his paper on “Climate Change and Trade-Some reflections”.

Dr.Debesh Bhowmik of International Institute for Development Studies,Kolkata wrote on “The conceptual fallacy of common property resources” where he focused on the issues on the fallacy arose in the theme since CPR created debates on origin of property rights and open access resources and contradictory aspects of its concepts and definitions. NSS 54^th round data suffer from the concepts since they used forest,waste lands,ponds and tanks,rivers,canals etc as CPR.

Prof.Kausik Gupta of Rabindra Bharati University  presented paper on “Issues in Common Property and watershed management”.He focused on the sustainable resource management with watershed development.

Saswati Biswas of North Bengal University emphasized on social space and declining CPR on the paper “Declining common property resources:Its implication for social space”.

Prof.Apurba Kumar Chattopadhyaya of BiswaBharati University said on “Common Property Water Resources in India:Some issues in Irrigation Management” which emphasized on the conjunctive use of ground water and surface water for sustainable development of water resources.

Rajib Pandey and Shashidhar Jha of Ministry of Environment and Forests, on the paper entitled “Common Property Resources and Climate Vulnerability Analysis of Lower Himalaya Communities” ,addresses climate change vulnerability of rural indigenous mountainous community based on the climate vulnerability index.It also discusses the associated critical issues in terms of climatic impact resilience and adaptation mechanism of these mountainous rural communities in context of CPR.

Prof. Dhirendranath Konar of Kalyani University presented paper on “Preservation of Common Property Resources” where he stressed on minimum reservation of CPR.

Somnath Hazra,Ashok Singha ,Abhik Saha ,Mohan Reddy of CTRAN,Bhubaneswar,presented paper on “Forest and Common Property Resource Management in Orissa:Is REDD + a viable option?” where they showed that collection of firewood   from CPR is the most intense cause of GHG emission and REDD+ is a win-win combination of livelihood promotion and GHG mitigation strategy.

Kshirod Chandra Mahato ,Prof of Kashipur Michael Madhusudhan Mahavidyalaya, presented the paper on “Environmental Thinking in Folk culture of Manbhum” and Narugopal Dey of the same college,presented on “Role of Rivers in BankimChandra’s Novels”.

Basistha Chatterjee,Niladri De and P.Ghosh of Asian School of Business Management,EIILM, Kolkata and Adventist Development and Relief Agency,Adra , presented their paper on “ Impact of participatory vegetation monitoring on growth management of major forest trees in panchayet soil conservation division,Bishnupur:A survey based study” which suggest that PVM proved to be an efficient forest management tool for conservation as well as development.

Prof.Suvranshu Pan and Ramanuj Goswami of M.M.M,Adra and Rabindra Bharati on “Pros and cons of common property resources with special attention on land and water management along with watershed development in India” said on eight parts of the topic,namely,introduction, concept and feature,link with sustainability along with the relationship with PPR,property right regimes,gradual degradation of resources,question of equity,some  suggestive measures and conclusions.  

Lastly,Abhay Sankar Sahu of the same college on “Challenges of Embankments in the Sundarbans” emphasized the protection of embankment (CPR).

The seminar enthused the students of the college and other staff as well because it has a great reality in that locality.

INDIA'S SERVICE SECTOR

India's share of service sector in GDP has been increasing an unprecedented rate since 80s and 90s onwards.In 1990-91,India's share of service sector was 42.7% which stepped up to 57.3% in 2008-09.On the other hand, the share of agricultural sector was 31.4% which decreased to 17.0% and the share of industrial sector was 25.9% which shifted to 25.8% during the same period.The sectoral change is asymmetric and unbalanced in context of Indian economy because 70% of India's population still depend on agriculture.A few decades ago, agricultural surplus produces industrial new projects which enables industrial growth.India's industrial growth is severely uneven and not sustainable to India's development.It ranges from 5-6% only.The agricultural growth stands only 3% on an average.On the contrary,the service sector growth appears to be 7-8% during recent decades. 10-12% of the population depend on industry and 15-20% population depend on service sector.Moreover,international trade from service sector is discouraging because trade balance of the sector is negative.But,the expansion of service sector in home economy is encouraging.The low growth of industrial sector could not earn much from trade except from electricals ,chemicals,IT,engineering,hides and skins, garments, textiles etc. And the agricultural sector's export earnings from food and horticulture and fisheries are likely to be mentioned but not rosy prospect.I wish to mention that the potentiality of Indian agriculture has been suffering from sickness due to lack of declining investment,no perspective plan,treating it a non-priority sector and non productive asset because other developing and industrial countries target industry or service sectors as the leading sectors for generating higher growth.But,India's scenario is rather different.It is fundamentally an agricultural country.If the Indian planners could not treat it a sector as prime importance and could not think the people dependent on this sector,then sustainable development path will surely distort its stability and growth .The growth and employment pattern will hamper ,the fundamental macro economic relations between variables like growth and inflation , employment and inflation, income distributional pattern of the economy.Ultimate,poverty and hunger could not be solved.Inequality will be widened.Trade deficit will increase and so to debt burden.The vicious circle of problems will be clouded over in the Indian economy.Is India progressing towards service-led economy?

GIVE ME 200 BILLION DOLLAR,I SHALL BANISH INDIAN POVERTY INTO ARABIAN SEA

I remember that IMF reported a few months back that India had no target based plan for  poverty eradication either by domestic finance or by foreign finance.India spent more than 60 years to fight against poverty but still its poverty head count ratio is more than 25% .On the contrary,China ,taking the same period,it was able  to eradicate poverty ratio just 11% only.How it was possible?Because,they had target rate of reduction of poverty ratio and the income generating techniques for the poor.If we imagine Indian Poverty Reduction Policies, we will see that all policies are short term or very short term of which there are no permanent solution for poverty stricken people who may be up the poverty line.Some of which were taken for infrastructural development from which some poor people benefited (say building roads,canals,social forestry,cash crop loans,IVJ,JRJ, and so many.)Very recently , 100days work - a political poverty eradication policy , which has no productive outcome in terms of GDP increase - is considered the prime policy and is also a temporary and short run policy.Assume PMRJ,PMSJ,IAJ,etc and many small projects for rural development which are disintegrated policies for sustainable development,cannot be treated as permanent cure for poverty reduction.India,since long, stopped in taking IMF - World Bank loan for poverty alleviation due to conditionality .And India is not entitled to take loan from HIPC initiatives.So,India  is permitted to take loans for projects.Above all,India is committed to declare its target in the MDG from where we see India's goal.We are lucky enough.But,if we examine poverty data,we see all targets of poverty reduction became unsuccessful.Even today, all politicians  agree that high inflation hampers poor peoples' purchasing power,but they ignore control on inflation.They say that they had no magic power to control inflation.How, awful and tragic.Until and unless we can assure permanent solution for income generation of the poor,we will fail to solve the genesis of the problem.In the  rural development,focus should be given on cluster work of productive sources of investment by which  poverty ratio can be dwindled.Moreover,the investment leakage in every poverty reduction strategies is visible.Corruption of public funds is everywhere.No body can protest except Anna Hazare.Poor India is depriving the poor.Thus , the distribution of income is becoming uneven.In the era of globalisation,the privatisation drive accelerated this space too.In the long run,we will observe a huge gap between the rich and the poor. The role of the public sector is becoming dim.If we clarify the capital assets of the poor and the rich,the situation is worse off than before.Why? The distribution of capital asset shifted in favour of the rich.Is there any policy to halt this process?Politician needs the poor for their existence but not for policy making.