Twin Deficit Relationship in a Developing Open Economy

Twin Deficit Relationship in a Developing Open Economy 5.1 Summary. This study investigates the twin deficit relationship in a developing open economy like India. The study strives to demonstrate that Keynesian proposition of a long run equilibrium relationship exists between the twin deficits, but the reversed direction of causality was found. That is the causality flows from current account deficit to budget deficit as against from budget deficit to the current account deficit. This study reveals that the twin deficit have a positive long run relationship between the budget deficit and current account deficit using the Johansen multivariate co-integration approach. The result confirms the existence of a long run relationship between the two deficits, thus supporting the Mundell-Fleming theory and refuting the Ricardian Equivalence Hypothesis (REH). The term â€Å"twin deficit† was initially invented to describe the co-movement between the budget deficit and the current account deficit in the United States (Chang and Hsu, 2009). Afterwards, researchers began applying it to other countries. Ever since, it has become an important area for researchers to examine the causal link between the two deficits and the direction of causality. The coincident of budget deficit and the current account deficits for most countries most especially in the United States (US) during the mid-1980s led to the characterization of this phenomenon as the â€Å"twin deficits† issue as both economic theory and empirical observation suggested a link between the two deficits. The main thrust of the twin deficit hypothesis is that current account deficits of most countries is caused by government’s budget deficits phenomenon and the most suitable way to solve this problem and stabilize internal and external deficits is reducing the government’s budget deficit. In other words, the direction of causality flows from the budget deficit to current account deficit. Two major theories used to explain the causal link between budget deficit and current account deficits are the Mundell-Fleming Model and the Ricardian Equivalence Hypothesis (REH). The traditional Keynesians use the Mundell-Fleming model to explain the twin deficit relationship by arguing that when budget deficit increases, the current account balance will deteriorate as the increases in the budget deficits will lead to increase real exchange rate, domestic interest rates and leads capital inflows and will deteriorate budget deficit. Some group of researchers used the Ricardian Equivalence Hypothesis (REH) to argue that no relationship exists between the two deficits as budget deficits results mainly from tax cuts which tend to reduce public revenue and public savings. They suggest that individuals will recognize these tax cuts as incurring future tax liabilities and thus will increase savings rather than consumption and will not have any effect on the current account balance. In examining the causal link between the two deficits for India, the study carry out the Augmented Dickey Fuller unit root test (ADF) and all the variables were found to be stationary after first differencing at 1 percent level of significance. Then applying the Johansen co-integration method, the study followed the max statistics and maximum Eigen value which stated that there exists at most one co-integrating equation in the model, signifying the existence of a long run relationship between the twin deficits as argued by the conventional twin deficit hypothesis. To identify the direction of causality between the two deficits multivariate Granger causality test was employed. To estimate the short run causality among the variables Vector Error Correction Model (VECM) was employed between the twin deficits and their interacting variables (such as inflation, interest rate and exchange rate) for the period (1990 to 2013). To predict the movements and behavior of two deficit impulse resp onse function was used to traces the impact of one standard deviation shock to one innovation on its current and future value of endogenous variables. The Granger causality test showed a uni-directional causality flowing from the current account deficits to the budget deficits in India between 1990 and 2013. The result of the Wald Test showed that the causality between budget deficit and current account does not exist, on the other hand it has been proved it is the current account deficit which leads the budget account deficit for the India economy. What is the reason it moves from cad to bd write 5.2 Recommendations. From the findings of the study, the following recommendations are given: 1) If government intends to reduce its â€Å"twin deficit† dilemma, it must begin by reducing its current account deficits and this can be achieved by reducing imports, increasing exports or a combination of both measures. 2) Also, since the findings of this study showed evidence of reverse causation from current account deficits to budget deficits, adjustments in fiscal balance can only be achieved through the implementation of strong external policies. 3) It is important for government to equally diversify the sources of national income since the economic transformation will result to minimal fluctuations in the fiscal balance of the Indian economy, thus resolving the â€Å"twin deficits† dilemma. 4) The study found that of all the interacting variables, in which interest rate and exchange rate Granger causes current account deficits. This implies that changes in the interest rate of the Indian economy will impact significantly in the current account balance. So the Central Bank of India must endeavour to consciously monitor the inflation and interest rate in the economy. 5) In reducing the current account deficit, increase in domestic savings is required which in turn requires the development of a strong financial sector. Write more 5.3 Conclusions. The study using modern econometric methods for estimation which showed that the twin deficits hypothesis was valid for the Indian economy as the result from the co-integration test showed the existence of long run equilibrium relationship between the budget deficit and the current account deficit. Also, the study found strong support for reverse causation also known as â€Å"current account targeting† for India. This implies that even the Mundell-Fleming model was valid for India the direction of causality was not from budget deficit to current account deficit but rather from current account deficit to budget deficit. It is evident from the results of the study that the direction of causation is from trade deficit to budget deficit therefore if there is trade deficit then it can certainly cause serious problem for the fiscal policy as well. That is why to avoid such problematic situation prudent steps should be taken to reduce trade deficit by coordination of fiscal and moneta ry policies with trade policy. Higher interest rate and higher inflation reduce competitiveness of our export and consequently deteriorate our trade balances and creates new problem for economy. The economic implication of this phenomenon is very important for the Indian economy. The reverse causality that was found to exist for India implies that if the Indian government intends to reduce the â€Å"twin deficit† phenomenon in India, it must begin by reducing the current account deficits. In other words, policies showed should be geared towards controlling the deficit in the current account most especially by diversifying the export base of the economy by promoting.

Dreams and Aspirations :: essays research papers

I have a dream†¦ you have a dream†¦ our nation has a dream†¦ our world has a dream. We all have a dream. We all have a dream, but the difference is how we realise our dream, how we obtain our dream, and how our dream changes us. This is evident in our learning of dreams and aspirations through the texts Flowers for Algernon by Daniel Keys, What’s Eating Gilbert Grape? by Lasse Hallstrà ¶m, and through my own studies of Million Dollar Baby by Clint Eastwood. These three highly acclaimed texts represent the same ideas on dreams and aspirations, which can be defined as hope, desire or the longing for a condition or achievement, but these texts express the same ideas differently, shaping our understanding of dreams and aspirations. â€Å"If you can imagine it you can create. If you can dream it, you can become it.† William Arthur Ward These three texts contain the search for dreams, whether they be absurd, simple, or take you on a journey. Throughout the texts, the protagonists realise their dreams, each represented in a different way. In Flowers for Algernon by Daniel Keys, Charlie’s dream is to be intelligent, not so that he can be normal, but so people will like him. Charlie knows that his retardation has cut him off from most of society, and has limited his ability to connect with people, but he does not mind. Charlie does not long to join society to increase his social standing; rather, he longs to join primarily because he is lonely. In Charlie’s mind, intelligence is the quality that will gain him entry into a world of friends. The resulting irony is that when Charlie does become incredibly intelligent, he finds himself even lonelier than before.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã¢â‚¬Å"I just want to be smart like other pepul so I can have lots of frends who like me.† progris riport 6th page 10 It is also Charlie’s innocence of his dream that allows him to be exploited. It is Professor Nemur that has allowed Charlie’s innocence to be vandalised through the operation, as Professor Nemur expresses his own motivations in comforting Charlie that he will be famous, and will make the history books. However, these are Professor Nemurs’ dreams not Charlies, and Nemur is only using Charlie to reach his dreams. â€Å"And he said that meens Im doing something grate for sience and Ill be famus and my name will go down in the books.

Business Markets and the Economy Essay

P6 describe how business markets are regulated in the UK (Case Study) M3 explain why the government needs to regulate business markets P7 explain how EU requirements influence business markets in the UK D2 evaluate the effectiveness of the regulatory regime in a selected market The main purpose of this assignment is to: describe how business markets are regulated in the UK and explain how EU requirements influence business markets in the UK. Scenario: Case study given Task 1 (ALL): Students need to consider how governments intervene in markets to regulate them (can be linked to P4). Intervention can be through taxes and subsidies which are designed to distort the market to achieve specific objectives. The work of the Competition Commission, and the offices of the regulators for the privatised but previously state-owned monopolies, should be examined to see the purpose and effect of government intervention. Topics that can be used in a case study example (do not all need to be covered as covered in P4): market failure; justification for intervention; market regulation; deregulation; unfair competition; competition policy;Â  Competition Commission; privatisation; private finance initiative; government policies; subsidies; taxation This provides evidence for P6 Task 2 (MOST): Students should build on the work for P4 and P6 and explain why governments intervene in markets and what the consequences of market interventions are. There are plenty of examples, reported on regularly where the regulators consider the consequences of industry activity on producers and consumers. For example, rail fares are increased annually and the proposals generate debate about balancing the interests of the train operating companies and passengers. (not to be attempted until completion of P6) This provides evidence for M3 Task 3 (ALL): Students should report on how EU policies and activities impact on UK business markets. One useful area to consider is in relation to aviation policy and how the EU has tried to put national flag carriers into a competitive framework which confronts national governments’ protectionist practices and gives consumers a better deal. Topics that must be covered: European Union; the single market (free trade, harmonisation, capital, labour, technical standards, simplified trading); monetary union; social chapter This provides evidence for P7 Task 4 (SOME): Students should evaluate the effectiveness of the regulatory regime in a selected market. If the banking industry is considered then the role of the Financial Services Authority in the period before the recapitalisation of the banks will provide some contrasting views as to its effectiveness. This provides evidence for D2 Sources of information: Textbooks Gillespie A – Business in Action (Hodder Arnold, 2002) ISBN 0340848200 Mankiw N and Taylor M – Economics (Thomson Learning, 2006) ISBN 1844801330 Marcouse I et al – Business Studies (Hodder Arnold, 2003) ISBN 0340811102 Sawyer M – The UK Economy, 16th Revised Edition (OUP Oxford, 2004) ISBN 0199266514 Sloman J and Sutcliffe M – Economics for Business (Financial Times/Prentice Hall, 2004) ISBN 0273683357 Journal The Economist Newspapers Business sections of broadsheet newspapers The Financial Times Websites news.bbc.co.uk/1/hi/business/default.stm The BBC website’s business section. www.bized.co.uk Bized provides a selection of teaching resources. www.direct.gov.uk/en/index.htm This is the UK government’s own site and there are links to a range of relevant data sources. www.esrc.ac.uk/ESRCInfoCentre/facts/index27.aspx?ComponentId=7102&SourcePageId=7079 The ESRC has current UK data. europa.eu Website of the European Union www.ofgem.gov.uk/Pages/OfgemHome.aspx Office of the Gas and Electricity Markets – the regulatory authority. Each regulator has a similar site. www.statistics.gov.uk The UK Statistics Authority. www.ukpublicspending.co.uk The site has data on public spending both current and historic.

How Homogeneous Charge Compression Ignition Works

How Homogeneous Charge Compression Ignition Works In the quest for ever-improving fuel efficiency and emissions reduction, an old and very promising idea has found new life. HCCI (Homogeneous Charge Compression Ignition) technology has been around for a long time but has recently received renewed attention and enthusiasm. While the early years saw many insurmountable (at the time) obstacles whose answers would only come as sophisticated computer controlled electronics were developed and matured into reliable technologies, progress stalled. Time has, as it always does, worked its magic and nearly every problem has been solved. HCCI is an idea whose time has come with nearly all of the parts and pieces of technology and know-how in place to make a real go of it. What is HCCI? An HCCI engine is a mix of both conventional spark-ignition and diesel compression ignition technology. The blending of these two designs offers diesel-like high efficiency without the difficult- and expensive- to deal with NOx and particulate matter emissions. In its most basic form, it simply means that fuel (gasoline or E85) is homogeneously (thoroughly and completely) mixed with air in the combustion chamber (very similar to a regular spark-ignited gasoline engine), but with a very high proportion of air to fuel (lean mixture). As the engines piston reaches its highest point (top dead center) on the compression stroke, the air/fuel mixture auto-ignites (spontaneously and completely combusts with no spark plug assist) from compression heat, much like a diesel engine. The result is the best of both worlds: low fuel usage and low emissions. How Does HCCI Work? In an HCCI engine (which is based on the four-stroke Otto cycle), fuel delivery control is of paramount importance in controlling the combustion process. On the intake stroke, fuel is injected into each cylinders combustion chamber via fuel injectors mounted directly in the cylinder head. This is achieved independently from air induction which takes place through the intake plenum. By the end of the intake stroke, fuel and air have been fully introduced and mixed in the cylinders combustion chamber. As the piston begins to move back up during the compression stroke, heat begins to build in the combustion chamber. When the piston reaches the end of this stroke, sufficient heat has accumulated to cause the fuel/air mixture to spontaneously combust (no spark is necessary) and force the piston down for the power stroke. Unlike conventional spark engines (and even diesels), the combustion process is a lean, low temperature and flameless release of energy across the entire combustion chamber. The entire fuel mixture is burned simultaneously producing equivalent power, but using much less fuel and releasing far fewer emissions in the process. At the end of the power stroke, the piston reverses direction again and initiates the exhaust stroke, but before all of the exhaust gases can be evacuated, the exhaust valves close early, trapping some of the latent combustion heat. This heat is preserved, and a small quantity of fuel is injected into the combustion chamber for a pre-charge (to help control combustion temperatures and emissions) before the next intake stroke begins. Challenges for HCCI An ongoing developmental problem with HCCI engines is controlling the combustion process. In traditional spark engines, combustion timing is easily adjusted by the engine management control module changing the spark event and perhaps fuel delivery. Its not nearly so easy with HCCIs flameless combustion. Combustion chamber temperature and mixture composition must be tightly controlled within quickly changing and very narrow thresholds that include parameters such as cylinder pressure, engine load and RPMs and throttle position, ambient air temperature extremes and atmospheric pressure changes. Most of these conditions are compensated for with sensors and automatic adjustments to otherwise normally fixed actions. Included are individual cylinder pressure sensors, variable hydraulic valve lift and electromechanical phasers for camshaft timing. The trick isnt so much as getting these systems to work as it is getting them to work together, very quickly, and over many thousands of miles an d years of wear and tear. Perhaps just as challenging though will be the problem of keeping these advanced control systems affordable. Advantages of HCCI Lean combustion returns 15 percent increase in fuel efficiency over a conventional spark ignition engine.Cleaner combustion and lower emissions (especially NOx) than a conventional spark ignition engine.Compatible with gasoline as well as E85 (ethanol) fuel.Fuel is burned quicker and at lower temperatures, reducing heat energy loss compared to a conventional spark engine.Throttleless induction system eliminates frictional pumping losses incurred in traditional (throttle body) spark engines. Disadvantages of HCCI High cylinder pressures require stronger (and more expensive) engine construction.More limited power range than a conventional spark engine.The many phases of combustion characteristics are difficult (and more expensive) to control. It is clear that HCCI technology offers superior fuel efficiency and emissions control compared to the conventional tried-and-true spark ignition gasoline engine. Whats not-so-certain yet is the ability of these engines to deliver these characteristics inexpensively, and, probably more importantly, reliably over the life of the vehicle. Continued advancements in electronic controls have brought HCCI to the precipice of workable reality, and further refinements will be necessary to push it over the edge into everyday production vehicles.

Free Essays on You Cant Always Get What You Want

You Can’t Always Get What You Want One of the major components in the unraveling of a relationship is the lack of communication. Whether this lapse of interaction is intentional or merely the product of a misconception, no amity stands a chance for survival without a healthy, trusting dialogue, unaffected by any outside interference. Without a complete faith between two patrons, especially in the case of an intimate association, factions such as suspicion, resentment, distrust, and ultimately jealousy begin to get a foothold. Throughout Shakespeare’s Othello, we see this degradation between Othello and Desdemona as a result of Iago’s cunning manipulations and machinations. The entire tragedy could have been avoided had Othello chosen to listen to and believe his wife, rather than the maliciously evil Iago whose actions seem to being missing a purpose. Nevertheless, Othello’s quick judgments and mistrusts cause the downfall of those around him. As always, Shakespeare is able to show us a vari ety of charact! er traits in humanity that don’t always make logical sense. We are taken on an adventure that shows us the contrast in one’s life that can be caused by a jealous mind, taking a respected and noble being and transforming him into a ranting, irrational creature set on revenge. The factor of jealousy is apparent in three of this tragedy’s players: Roderigo, Othello, and Iago. Roderigo, a rich Venetian with desperate aspirations of obtaining Desdemona as his own, feels the only way for this to happen is by purchasing the assistance of the vile Iago. After repeatedly listening to Iago on how he can alter things for his favor, he ends up broke and away from home in Cyprus, with one final option; kill Cassio, his main competitor for Desdemona after she leaves Othello. His utterly pathetic existence becomes painfully apparent with his failure to complete his final task, and as a result, Iago slays him in yet anoth... Free Essays on You Can't Always Get What You Want Free Essays on You Can't Always Get What You Want You Can’t Always Get What You Want One of the major components in the unraveling of a relationship is the lack of communication. Whether this lapse of interaction is intentional or merely the product of a misconception, no amity stands a chance for survival without a healthy, trusting dialogue, unaffected by any outside interference. Without a complete faith between two patrons, especially in the case of an intimate association, factions such as suspicion, resentment, distrust, and ultimately jealousy begin to get a foothold. Throughout Shakespeare’s Othello, we see this degradation between Othello and Desdemona as a result of Iago’s cunning manipulations and machinations. The entire tragedy could have been avoided had Othello chosen to listen to and believe his wife, rather than the maliciously evil Iago whose actions seem to being missing a purpose. Nevertheless, Othello’s quick judgments and mistrusts cause the downfall of those around him. As always, Shakespeare is able to show us a vari ety of charact! er traits in humanity that don’t always make logical sense. We are taken on an adventure that shows us the contrast in one’s life that can be caused by a jealous mind, taking a respected and noble being and transforming him into a ranting, irrational creature set on revenge. The factor of jealousy is apparent in three of this tragedy’s players: Roderigo, Othello, and Iago. Roderigo, a rich Venetian with desperate aspirations of obtaining Desdemona as his own, feels the only way for this to happen is by purchasing the assistance of the vile Iago. After repeatedly listening to Iago on how he can alter things for his favor, he ends up broke and away from home in Cyprus, with one final option; kill Cassio, his main competitor for Desdemona after she leaves Othello. His utterly pathetic existence becomes painfully apparent with his failure to complete his final task, and as a result, Iago slays him in yet anoth...

SABIC Company , (international business) Essay Example | Topics and Well Written Essays - 1750 words

SABIC Company , (international business) - Essay Example al., 2012). From the history of international business, it can be learnt that international organisations have been in existence for centuries, but at present these organisations are characterised by explosive growth and close control of foreign business activities. They market the products and services in different ways than their predecessors did. Traditionally, the complex international business transactions were the domain of representatives, global policies and business specialists. Currently, a converging set of strong economic, social and cultural trends demand that every citizen has certain kind of international eloquence and that must be understood by organisations that operate international businesses (Hill, 2010). Based on this aspect, the report describes international business of one multinational organisation namely SABIC. ... The international business environment is quite complex and diverse than the domestic business environment. This international business is influenced by the process of globalisation. Globalisation denotes the on-going social economic and political procedures that inflate the relationship and encompass the interdependencies among people and organisations of various nations (Rugman & Collinson, 2012). The era of globalisation has brought about a rapid increase in the level of international trade and financial integration. There have also been changes in the configuration of trade and product flows. The forces of globalisation are intense and they are impacting the business activities of organisations. The initiations of information and communication technology (ICT) and quick economic liberalisation of business and investment in several nations have augmented the procedure of globalisation. Present market is swamped with not only industrial commodities but also with the items of regula r consumption. Every day an average individual utilises such products and services which are from different origins. The increased integration of market, mobility of people with international travel for employment along with internet penetration has virtually transformed the international business (Joshi, n.d.; Tayeb, 2000). Globalisation and International Business of SABIC One prevalent example of globalisation and its impact on international business can be observed from a Saudi Arabian multinational organisation namely SABIC. SABIC is a chemical producer which specialises in manufacturing a variety of chemicals, polymers and fertilisers among others. It was established in the year 1976 and since then the organisation has expanded the business considerably in

Is consciousness a strongly emergent property Essay

Is consciousness a strongly emergent property - Essay Example The emergentist theories on consciousness are based upon the idea that the whole of consciousness is far greater than that of the parts from which it is composed. The reductionist theories suggest that there cannot be a system in which the parts do not exist and therefore cannot be reduced from that system. In discussing the idea of the consciousness, the idea of an emergent system from which something more is created that is beyond that of the definable parts suggests that the idea of consciousness is an emergent system. The concept of consciousness is a difficult place to locate in relationship to the natural world. It is a part of the present, an aspect of the moment, but also an intangible that cannot be placed in the physical plane. Chalmer (2003) discusses the concept of consciousness in relationship to six different classes, which can then be divided into two sets. The first set is focused on the idea of consciousness as a physical process where the second is focused on the id ea of consciousness which requires a â€Å"re-conception for a physical ontology† (Chalmer 2003, p.103). The idea of consciousness, although easily defined as being present or not, as in either someone is conscious or not, it is far more difficult to determine what it means to be conscious. Consciousness is essentially defined by the idea of experience. What is perceived is translated into the mind and the ability to create those perceptions can be defined as a part of what it means to be conscious. Identifying the functions and processes that are the defining concepts of consciousness and trying to separate them between the physical and the metaphysical becomes a part of how the problem of consciousness becomes more complicated. American philosopher John Searle stated that â€Å"the most important problem in the biological sciences today is the problem of consciousness†¦understanding the nature of consciousness crucially requires understanding how brain processes cause and realize consciousness† (Bonshek, Bonshek and Fergusson 2007, p. 3). The duality of being ‘awake’ is in the idea of the separation of mind and body. When the mind is separated from the body as a metaphysical presence, the idea of consciousness becomes far more complicated to define as a state of being. In trying to define consciousness, the two opposing theories are termed emergent or reductionist. The emergent theories of consciousness can be understood as a development of a group of parts that are all associated and when put together there is more to them than how they are valued separately. Kim (1999, p. 3) that â€Å"systems acquire increasingly higher degrees of organizational complexity they begin to exhibit novel properties that in some sense transcend the properties of their constituent parts, and behave in ways that cannot be predicted on the basis of the laws governing simpler systems†. The emergent concept allows for the idea that the parts d o not have meaning when not in the function of the whole. From a reductionist perspective, the definition of the object is constructed by the understanding of how the parts work individually and are then assembled to create the whole (Bonshek, Bonshek, and Fergusson 2007). It might be said that the reductionist looks at what can be determined through tangible means and the emergent theorist looks at how the sum extends beyond the tangible provability of what is reduced to its parts. In order to look at the idea of consc