On the flow of funds accounts and inter-sectoral mobility of capital in India

This study uses the flow of funds accounts framework and undertakes an in-depth analysis of the inter-sectoral mobility of capital in India. Unlike previous studies, the FH model is estimated at the sectoral level using annual data for the period 1950–51 to 2012–13. The model estimated in one-regime setting with no structural break provides a weak and mixed support and that estimated in a sample-split setting with a single structural break provides no support for the presence of a long-run relationship between saving and investment for all the sectors. In contrast, the model estimated with multiple structural breaks provides dominant support for the presence of cointegration between saving and investment for all the sectors. The end-of-sample cointegration breakdown tests suggest the breakdowns of cointegration between saving and investment in all the sub-sample periods for the household and PCB sectors, but not for the public sector. The FOF accounts could be used to monitor the borrowing and lending operations of both financial and non-financial sectors and to identify any deformities in the system. The regulatory and supervisory policies need to be put in place promptly to resolve the identified deformities at their early stages, before they magnify and make the entire system dysfunctional.     

Accounting for China's Saving‐Investment Imbalance from 2002–2008

This paper decomposes and analyzes China's saving‐investment imbalance (equivalent to current account imbalance) from 2002–2008. We first use the Flow of Funds Accounts to calculate the saving and investment rates (propensity) of the household, corporate and government sectors and to evaluate their relative contribution to the aggregate saving‐investment surplus. The results indicate that the increase of saving‐investment surplus can be attributed to the steady increase of saving by the household and government sectors and the short‐term downsizing of investment by the corporate and government sectors. We then use more disaggregate supplementary datasets to explore the factors behind the evolution of the saving and investment rates for the three sectors. The rise of the household saving rate mainly sources from the urban sector. The corporate saving rate experienced a steady increase because of the rise of profitability. Government macroeconomic policies have had a strong influence on the saving and investment patterns of the corporate and government sectors.     

中国高储蓄率问题探究——1992-2003年中国资金流量表的分析

本文以国家统计局公布的1992—2003年中国资金流量表为基础,从收入分配和部门储蓄倾向等两个方面对居民、企业和政府等国内三个部门的储蓄率进行了比较分析。我们发现,尽管居民部门的储蓄率最高,但是,自1992年以来,它实际上呈逐步下降趋势,其主要原因在于居民部门获得的劳动报酬、财产收入和再分配收入均有所下降;企业储蓄率呈现缓缓上升趋势,主要原因并不在于企业盈利能力的提高,而在于其主要支出——对居民部门的劳动报酬支出和利息支出长期被稳定在较低的水平上;政府储蓄率在经历了上个世纪的低位徘徊之后,于2000年以后急剧上升,其主要原因在于,通过初次分配和再分配,政府的可支配收入在国民收入的分配中占据了越来越大的份额,同时政府部门的储蓄倾向也在不断提高。本文的政策建议是:为了实现以提高国内消费率为核心的经济发展战略,我国的经济运行应全面转向以改善收入分配结构、提高居民收入为重点的轨道上。为达此目的,加速财政政策向公共财政转型,增加公共支出和对居民的福利支出,在提高劳动生产率的基础上提高企业对劳动者的支付水平,应成为今后我国宏观调控的长期任务。     

IS JAPAN'S HOUSEHOLD SAVING RATE REALLY HIGH?

This paper discusses, and measures the quantitative impact of, a number of conceptual issues relating to the household saving rate data in the National Accounts of Japan. It finds that Japan's seemingly high household saving rate is biased due to the exclusion of capital transfers and real capital gains, the valuation of depreciation at historical cost rather than at replacement cost, the use of a residual measure of financial saving rather than Flow of Funds Accounts data thereon, and the treatment of expenditures on consumer durables as consumption rather than as saving, but that the biases are to a considerable extent mutually offsetting. It also finds that the Japan-U.S. gap in household (personal) saving rates is due largely to conceptual differences and deficiencies and that household saving in Japan consists primarily of financial saving (net lending), meaning that most of it is available to finance investment in other sectors of the economy and/or abroad.     

Inflationary effects of monetary policies in newly industrialized economies with cross-sectoral labor and capital immobility

This paper studies the effects of monetary policies in newly industrialized economies characterized by extremely low level of labor and capital mobility between urban and rural sectors. Policies are executed in the urban sector which sends waves of adjustments in the rest of the economy. I show that with liquidity constraints and immobility in labor and capital, the sector-specific effects are markedly different from those in a one-sector economy. In particular, they are asymmetric and the rural sector lags behind the urban sector during adjustment process. This explains temporary phases of significantly high inflation with uneven sectoral effects which often accompany major reforms in the banking and monetary institutions of such economies, e.g. in case of India. Finally, as consumption patterns alter in such an economy undergoing structural changes, the sectoral distribution of liquidity is affected inducing dissimilar responses to shocks, both within and between sectors.     

Estimating Sectoral Disinflation Cost in India: Some Structural VAR Evidence

This paper attempts a sectoral estimation of sacrifice ratios for India. Two Structural VAR models are estimated using quarterly data for the period 1997–98 Q1 to 2016–17 Q1. The empirical findings suggest that the real cost of disinflation policy is not negligible in India. The estimate of sacrifice ratios in terms of real GDP range from 0.16 to 0.17 depending upon the model employed. The calculation of sectoral sacrifice ratios show that all the three sectors are affected negatively and the largest impact is found in the manufacturing sector followed by the other two sectors, i.e., agriculture sector and service sector. The sacrifice ratio in the manufacturing sector is found to be 1.10 and 0.72 indicating huge negative impact of tight monetary policy. Similarly, for the agriculture sector the sacrifice ratios are 0.40 and the service sector shows sacrifice ratios of 0.36 and 0.37 respectively for different models. Further, from 10-year rolling estimation, we find that sacrifice ratios are time varying. The sacrifice ratio is declining in the last few quarters at the aggregate and sectoral levels indicating that disinflation could be less costly in recent times. However, the high disinflation cost experienced prior to the year 2015 can’t be neglected. So, it is important to take caution while interpreting the results of disinflation cost in India.

     

"后危机"时代中国财政政策的选择——部门投资政策影响建模与分析

当前中国经济已经进入后危机时代,继续加大各产业部门的国家投资是巩固前阶段经济刺激政策成果的一项重要措施。为了分析分部门投资政策的经济影响,文章构建了一个包含8个产业部门和8个区域的中国多区域宏观经济可计算一般均衡模型,通过分析典型分部门投资情景的政策模拟结果,文章提出了三种宏观经济政策目标约束下的投资部门指向建议。     

Does Gender have any Effect on Aggregate Saving? An empirical analysis

This study investigates the effects of gender on aggregate saving. We test the hypothesis that shifts in women's relative income, which can affect their bargaining power within the household, have a discernible impact on household saving and, by extension, gross domestic saving, due to differing saving propensities by gender. The empirical analysis is based on panel data for a set of semi-industrialised economies, covering the period 1975-95. The results indicate that, as some measures of women's relative income and bargaining power increase, gross domestic saving rates rise. The implied gender disparity in saving propensities may be linked to differences in saving motives based on gender roles, and well as divergent experiences of economic vulnerability. These findings suggest the importance of understanding gender differences in planning for savings mobilisation and in the formulation of financial and investment policies.     

Labour Markets in China: A Study of the Structure and Evolution of Wages

This paper examines the development of labour markets and the evolution of a structure of wages in China, using household surveys for 1988, 1995, 2002 and 2007. It finds evidence of both provincial and sectoral segmentation in labour markets, with eastern regions and the state-controlled sector enjoying high wage premiums in the early reform period. During the reform, China has progressed slowly towards an integrated labour market with convergence in incomes between the rural non-agriculture sector and the urban market-based sector by 1995, when industry flourished in the rural areas. The wage gap between the rural non-agriculture sector and other sectors increased and the urban state-controlled sector remained segmented with respect to all other sectors up to 2002. However, the data from 2007 show there has been increasing sectoral and spatial integration.     

Disentangling the Poverty Effects of Sectoral Output,Prices, and Policies in India

This paper attempts to disentangle the poverty effects of key policy variables that directly affect the poor (namely the government‐led channel of development spending and financing) in both agricultural and non‐agricultural sectors after accounting for the effect of respective sectoral per capita income and prices, using data from India over five decades. The paper emphasizes the sectoral composition of income and prices as mechanisms influencing the level of poverty and establishes empirically that it is the rise in non‐agricultural per capita income that reduces rural poverty via the channel of internal migration, after having controlled for the variation in key components of fiscal spending and monetary/financial policy via the availability of credit. Uneven sectoral growth pattern explains why urban poverty becomes a spill‐over of persistent rural poverty when the agricultural sector shrinks. While checking for robustness, there is evidence that the rise in non‐agricultural income alone may not reduce rural poverty, when measured in terms of rural infant mortality rate as a non‐income indicator of well‐being.     

China's Recent Economic Performance and Future Prospects*

Our forecast of China's economic future is based primarily on the supply side growth accounting model. The life cycle model of household saving provides us with the most plausible explanation for a continued high rate of savings and investment. China's labor force will soon stop growing, but migration out of agriculture should have little impact on farm output while providing a steady stream of labor to the modern more productive sectors. There is also room for rapid expansion of human capital. Maintaining high productivity growth will depend primarily on strengthening currently weak institutions, notably the financial sector and, more importantly, the legal system.     

Must improved labor standards hurt accumulation in the targeted sector? Stylized analysis of a developing economy

This paper analyzes a stylized small open economy that consists of two tradable output-producing sectors: a manufacturing sector and a (mainly tourism-related) services sector. Assuming sectoral differences based on stylized facts, we explore the impact of higher labor standards in the manufacturing sector on the long-term prospects of the economy using comparative dynamic exercises to analyze changes in relative prices, foreign capital flows, and the sectoral distribution of investment and output. We find, in particular, that imposing higher standards across the manufacturing sector could, under certain conditions, shift the structure of the domestic economy in favor of that sector. This result is driven by changes in relative profitability in the presence of learning-by-exporting.     

劳动力转移过程中的高储蓄、高投资和中国经济增长

中国的转轨经济具有独特的增长模式,其典型特征就是持续的高储蓄率和高投资率。本文从劳动力转移的角度,解释了这种模式赖以产生的基础。我们认为,剩余劳动力由农业向工业(工业化)、由农村向城市(城市化)、由国有向非国有(市场化)的持续转移是我国经济能够长期、高速增长的关键,而高储蓄率和高投资率既是这种增长模式的必然结果,也是劳动力得以持续转移乃至这种增长模式得以维持的关键原因。为了防止效率低下的金融部门阻碍劳动力的转移,在开放经济条件下,引入纯粹金融意义的国际直接投资也就成为了必然。与此同时,本国金融部门也将持有一个规模逐步扩大的外汇储备。本文的另一个重要结论是,中国经济的增长和波动是统一的。尽管其中的机制有别于真实经济周期理论,但是,“中性”依然应该作为宏观经济政策的基本出发点。     

Is business saving really none of our business?

This paper revisits the role of business saving in the economy by critically scrutinizing the existing macroeoconomic and corporate finance literatures. We assemble and exploit a broad international, unbalanced panel of 47 countries over 1995–2013 on saving and investment by institutional sector to shed new light on the relevance of business saving for private saving and investment around the world. We show that businesses contribute on average more than 50% of national saving around the world. Using this unique dataset, we find evidence of partial piercing of the corporate veil: a $1 increase in business saving gives rise to a decrease of approximately $0.40 in household saving–thereby raising private saving by as much as $0.60. We also find that a $1 increase in business saving increases private investment by as much as $0.20 in countries where limited financing is a binding constraint on firms’ investment. The evidence suggests that business saving and external financing are complementary sources of financing for investment.     

Location factors of FDI and the growing services economy1

Foreign direct investment (FDI) has increasingly shifted toward the service sector. This change in the industrial composition of FDI and the non‐tradable nature of services may have altered the importance of location factors for investment decisions. To capture potential changes in FDI determinants, a contrasting sectoral analysis is performed. Based on FDI stock data from eight new EU member states for the period 1998–2004, we implement a dynamic panel approach allowing the speed of adjustment to the equilibrium investment level to vary across sectors. Results support our assumption that investment into the service sector, which is characterized by low installation costs, adjusts much faster to its desired level than manufacturing FDI. Thus, government interventions to attract FDI are likely to boost the service sector immediately while having a slower impact on manufacturing FDI. Furthermore, as services are mostly non‐tradable, FDI into this sector is largely based on market‐seeking motives while FDI in the manufacturing sector is also driven by international price competitiveness measured by real unit labour costs.     

Changing transmission of monetary policy on disaggregate inflation in India

This paper investigates the time-varying effects of monetary policy on aggregate, sectoral, and disaggregate inflation in India from 1997 to 2017 using a large dataset of 439 variables. We find that the effectiveness of a contractionary monetary policy in controlling aggregate inflation has improved over time. This improvement in the policy's effectiveness can be attributed to better transmission through credit and asset price channels. In investigating disaggregate inflation, we find that a contractionary monetary policy is more effective in reducing inflation in the manufacturing sector than in the agricultural sector. Further, the sacrifice ratios in all manufacturing sectors have improved over time. However, the commodities prices of some sectors respond positively after a monetary contraction, which demonstrates the presence of a cost channel in the Indian economy. Our findings suggest that the monetary authority in India should have an interest rate rule that incorporates sectoral inflation and reacts to each with different intensity.     

Macroeconomic adjustment under loose financing conditions in the construction sector

We provide a model with sector-specific debt-collateral constraints to analyze how asymmetric financing conditions across sectors affect the aggregate investment, credit and output composition. In our model, investments in the construction sector allow for higher leverage than investments in the non-durable consumption goods sector. When borrowing constraints bind in both sectors, unit returns in the construction sector are lower due to a positive pledgeability premium, and changes in interest rates have a non-monotonic effect in the sectoral composition of investment. Specifically, a fall in interest rates triggers a relative rise in investment in the consumption goods sector when rates are relatively high, whereas the opposite effect obtains when rates are sufficiently low. We argue that this prediction of the model, which depends critically on the asymmetries of financing conditions across sectors, is consistent with the evidence for a number of OECD countries during the decade before the 2007/2008 crisis     

Regional divergence and club convergence in India

This paper examines regional divergence in income across different states in India, and estimates convergence clubs endogenously. The paper makes two useful contributions. First, the data is analyzed using a novel method due to Phillips and Sul (2007) leading to different conclusions in comparison to past studies, and secondly sectoral level data is employed which to our knowledge has not been employed in the literature before. Applying the novel approach to panel data relating to fifteen major states of India for the period 1968/69–2008/09, the results display significant divergence in per capita income across states at the aggregate and sectoral levels. There is also evidence of convergence clubs and variations in the number and composition of clubs across sectors. While three clubs are identified at the aggregate level, at the sectoral level we find three clubs in the industrial sector, two clubs are identified in both the agriculture and services sectors. The final part of the paper deals with the policy implications.     

Input–output research in structural equivalence: Extracting paths and similarities

The systematic study of the way in which intersectoral transactions are organized is an interesting source of information about the pattern of existing economic relationships in one country that allows comparison of its structural features with those of another economy of reference. A new tool in the input–output context that allows us to reveal the functioning economic structure by determining the structural equivalent sectoral groups is proposed. The aim is to outline a new approach to clustering sectors based on similarities between sector linkages profiles. The obtained set of structurally equivalent sectors defines a reduced model which provides additional information about the main paths of influence and the degree of complexity. The structural equivalent sectors of Spain in 2000 and 2005 are determined. The Spanish economy has evolved to a more connected and oriented-service economy.