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’, the influence and impact of international trade, changes in money supply, exchange rate volatilities, and most importantly, the strength of the financial system need to be acknowledged as primary issues that create enough concern for policy makers. The paper, “Exports, Imports and Economic Growth: An Empirical Analysis of Tunisia”, by Qazi Muhammad Adnan Hye and Houda Ben Haj Boubaker, investigates the linkages between exports, imports and GDP in Tunisia. This study covers the period 1960-2008 and impliedly has taken note of changes in the world economic order over this period of time. It also confirms the impact of international trade on an economy’s growth and also the need to strike a balance between foreign debt and economic growth.

An economy’s growth process could be easily hurt due to the imbalance created by foreign debt and its resultant impact on the levels of domestic money supply. In the present and future scenario, it is vital for India to ensure that such negative impacts do not exist. In this context, the paper, “Money Supply and Inflation: A Historical Analysis”, by Rajkumar A Waingade, analyzes the relationship between money supply and price level in India. Significantly, the study explains the relationship between growth in money supply, price level and national income. The study also points out the need to maintain the economy in a healthy state, perhaps with a view that any ‘shocks’ arising out of imbalances could then get absorbed without affecting economic growth.

This view is reasonable against the background of the East Asian Crisis of the 1990s. The paper, “Readiness of ASEAN Banking Sector Integration: Recent Development and Statistical Evidence”, by Har Wai-Mun, Lee Teck-Heang and Tam Cai-Lian, is a timely reminder to these East Asian economies that any process of economic integration could succeed only if the health of the financial system remains sound. Interestingly, the study reveals that vast differences exist between Asean countries and hence a cautious approach needs to be applied before achieving the desired objective of ‘total integration’.

The paper is also a timely reminder that the adversities of 1990s should not get repeated once again. In this regard, this ‘bloc’ of countries could also benefit from another study done by Ahmed Sabry Abou-Zaid, titled, “Exchange Rate Pass-Through in the Mideast Region: Evidence from Egypt and Israel”. In the ensuing years, it is absolutely essential that International Monetary Fund and similar international bodies ensure that adequate systems and confidence are created before calling for exchange rate liberalization and similar essentials are followed in the process of liberalization.

-- Y G Sivaram
Consulting Editor