Archive for May 12th, 2014

Modelling India’s external sector..

May 12, 2014

N. R. Bhanumurthy, Sukanya Bose and Swayamsiddha Panda of NIPFP have released this paper modelling India’s external sector.

In this paper an attempt has been made to discuss the theoretical and empirical issues in external sector of India. As the policy changes in the external sector have been a continuous process since 1991, it is expected that the theoretical relationships would have undergone a sea change in terms of its determinants, direction and extent of its impacts. Further, with significant changes in the global economy notably in the international commodity prices and global financial crisis, one would expect structural shifts in empirical facts. This paper looks at these issues and draws a suitable framework relevant for current conditions. In Section II and III, we briefly explore the recent literature for the conceptualization of the external sector in theoretical literature and empirical studies, focusing on macroeconomic dimensions. Section II looks at the trade flows, while section III looks at the capital flows. The emphasis is mainly, though not exclusively, on India given the specificity of the structure of its external economy. The models surveyed lay a background to the empirical work undertaken in Section IV and V. Section VI discusses the findings and the agenda for future.

Findings are standard:

Preliminary results from various scenarios suggest that the model is robust. The results show that external sector is indeed sensitive to changes in the external environment such as international oil and commodity price changes, change in external demand, decisions of the Credit Rating agencies and to the domestic policies such as changes in import duty, changes in price pass-through policies, and some growth/investment policies. More than the domestic policies, the external environment plays a predominant role in the behavior and performance of the external sector, a finding that is broadly in tune with the literature.

However, the paper is interesting from an empirical angle. It gives this detailed approach to modelling the external sector along with diagram etc..Gives more clarity on how x is connected to y and so on..

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A sovereign debt story: Republic of Argentina vs NML Capital

May 12, 2014

An interesting piece by T Sabri Oncu (former CAFRAL chief economist). He points to this recent case of NML capital (hedge fund) suing Argentina Govt over payment of debt. This blog pointed to another piece which shows how an Act in US allowed US financial firms to sue sovereigns in US courts over debt payment issues.

NML capital (along with others) has taken advantage of  this act to sue Argentina:

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