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The IUP Journal of Monetary Economics

February '11
Focus

India and other Asian economies are expected to continue to be the front-runners in the coming years in the global context of increasing affluence and economic growth. In this‘global village’,

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Exports, Imports and Economic Growth: An Empirical Analysis of Tunisia
Money Supply and Inflation: A Historical Analysis
Readiness of ASEAN Banking Sector Integration: Recent Development and Statistical Evidence
Exchange Rate Pass-Through in the Mideast Region: Evidence from Egypt and Israel
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Exports, Imports and Economic Growth: An Empirical Analysis of Tunisia

-- Qazi Muhammad Adnan Hye and Houda Ben Haj Boubaker

The aim of this study is to investigate the export-led growth, import-led growth and foreign debt sustainability hypotheses in the case of Tunisia by using annual time series data for the period 1960-2008. Autoregressive Distributed Lag (ARDL) approach is employed to determine the long-run relationship or direction of long-run causality between exports, imports and GDP, and the strength of causal relationship is examined by using variance decomposition method. The results indicate unidirectional causality from exports to economic growth and bidirectional relationship between imports and economic growth. Thus, both export-led growth and import-led growth are valid for Tunisia. On the other hand, there is bidirectional association between exports and imports. The long-run elasticity of exports with respect to imports is 1.02 and long-run elasticity of imports with respect to exports is 0.86. Thus, foreign debt is weakly sustainable in the case of Tunisia. The empirical findings of the study are important for policy makers of Tunisia in the formulation of trade policies.

Money Supply and Inflation: A Historical Analysis

-- Rajkumar A Waingade

An analysis of the relationship between money supply and price level in the context of India reveals that, over a long period, there exists a positive correlation between growth in money supply and price level. The association between the two has however not been proportional. The growth in money supply has most of the time exceeded the growth in price level. The gap between the two has been explained by the growth in real national income. If the combined growth in price level and real national income over a long period is considered, then it comes very close to the growth in money supply, implying a near proportional relationship between the two. This means the impact of change in money supply gets distributed between the change in price level and change in real national income, depending upon the state of the economy. A poor state of the economy as implied by the poor real national income growth causes the price level to carry the major part of the impact of change in money supply. This appears to be true in the case of India. The discrepancy observed with regard to the growth in the broad measure of money supply (M3) and the combined growth in WPI inflation and real national income has been found to be the result of fall in income velocity of money for M3.

Readiness of ASEAN Banking Sector Integration: Recent Development and Statistical Evidence

-- Har Wai-Mun, Lee Teck-Heang and Tam Cai-Lian

ASEAN has a vision to form a single community by 2020. Thus, ASEAN integration has been a topic of great interest but unfortunately, attention has been over-focused on economic aspect. This paper aims to study the specific aspect of ASEAN banking sector integration with three objectives. Firstly, the paper aims to compare the ASEAN countries' respective commitments to its own members through ASEAN Framework Agreement on Services (AFAS) against their commitments to the world under General Agreement on Trade in Services (GATS). Secondly, it aims to evaluate the readiness of ASEAN for banking sector integration using statistical approach. Thirdly, the statistical results from the second objective are utilized to construct an indicator of readiness for ASEAN banking sector integration. The results reveal that ASEAN countries' commitments to AFAS did not differ much from their respective commitments to GATS. Statistical evidence shows that there are vast differences in monetary conditions between ASEAN countries, hence causing difficulties for one-step total integration. Therefore, `paired-integration' is proposed based on the results of `readiness indicator'. The results reveal that optimal pairing for Malaysia is Thailand, followed by Philippines and Singapore.

Exchange Rate Pass-Through in the Mideast Region: Evidence from Egypt and Israel

-- Ahmed Sabry Abou-Zaid

In the early years of exchange rate liberalization, it is expected to find close association between exchange rate movements and domestic prices. That is, countries that move from fixed to floating exchange rate regime will probably experience an increase in their domestic prices following the liberalization. Because of `fear of inflation', Egypt and Israel delayed the exchange rate liberalization process despite IMF's call for it. This paper is an attempt to investigate the impact of exchange rate movements on different prices in Egypt and Israel using a VAR approach. It also tests the validity of the Taylor hypothesis that low inflationary environment leads to a low exchange rate pass-through.

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Automated Teller Machines (ATMs): The Changing Face of Banking in India

Bank Management
Information and communication technology has changed the way in which banks provide services to its customers. These days the customers are able to perform their routine banking transactions without even entering the bank premises. ATM is one such development in recent years, which provides remote banking services all over the world, including India. This paper analyzes the development of this self-service banking in India based on the secondary data.

The Information and Communication Technology (ICT) is playing a very important role in the progress and advancement in almost all walks of life. The deregulated environment has provided an opportunity to restructure the means and methods of delivery of services in many areas, including the banking sector. The ICT has been a focused issue in the past two decades in Indian banking. In fact, ICTs are enabling the banks to change the way in which they are functioning. Improved customer service has become very important for the very survival and growth of banking sector in the reforms era. The technological advancements, deregulations, and intense competition due to the entry of private sector and foreign banks have altered the face of banking from one of mere intermediation to one of provider of quick, efficient and customer-friendly services. With the introduction and adoption of ICT in the banking sector, the customers are fast moving away from the traditional branch banking system to the convenient and comfort of virtual banking. The most important virtual banking services are phone banking, mobile banking, Internet banking and ATM banking. These electronic channels have enhanced the delivery of banking services accurately and efficiently to the customers. The ATMs are an important part of a bank’s alternative channel to reach the customers, to showcase products and services and to create brand awareness. This is reflected in the increase in the number of ATMs all over the world. ATM is one of the most widely used remote banking services all over the world, including India. This paper analyzes the growth of ATMs of different bank groups in India.
International Scenario

If ATMs are largely available over geographically dispersed areas, the benefit from using an ATM will increase as customers will be able to access their bank accounts from any geographic location. This would imply that the value of an ATM network increases with the number of available ATM locations, and the value of a bank network to a customer will be determined in part by the final network size of the banking system. The statistical information on the growth of branches and ATM network in select countries.

Indian Scenario

The financial services industry in India has witnessed a phenomenal growth, diversification and specialization since the initiation of financial sector reforms in 1991. Greater customer orientation is the only way to retain customer loyalty and withstand competition in the liberalized world. In a market-driven strategy of development, customer preference is of paramount importance in any economy. Gone are the days when customers used to come to the doorsteps of banks. Now the banks are required to chase the customers; only those banks which are customercentric and extremely focused on the needs of their clients can succeed in their business today.

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