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The IUP Journal of Monetary Economics

Economics has the uncanny knack of ‘disproving’ things that are ‘proved’ and vice versa. This feature enlivens observation and study, promotes debates, and therefore makes‘Economics’ candidates more ideal for tackling managerial issues. A theme that has always created interest, has on the one hand been the extent of ’intervention’ by the political bosses of an economy. On the other, the ‘culture’ of an economy—the target group of masses (people) in an ‘interventionist’ economy or a ‘free-market’ economy—has also an important role to play in such debates.

Consequently, many studies revolve around the impact and influence of these two diverse factors over the management of the economy. Thanks to globalization, such impact and influence would not just get restricted to ‘one’ economy but embrace the ‘global’ economy as well. In a way we have seen these two extremes of ‘interventionist’ and ‘free-market’ factors and their impact and influence on monetary policy issues, during the last two decades.

The disintegration of the Union of Soviet Socialist Republics (USSR) led the economies of that zone to move away from an ‘interventionist’ to a ‘free-market’ environment. The other type of movement from a ‘free market’ to an ‘interventionist’ mechanism happened after the US was hurt in the aftermath of the financial crisis that unfolded largely after the year 2008, effecting governmental ‘intervention’ in correcting a ‘free-market’ economy. Hence, ‘people’ lead the economy either to ‘intervention’ or ‘free-market’ or both. There is nothing sacrosanct about one type of movement branded as the panacea for all economic ‘ills’.

The contents of this issue are to be viewed against this background and this debate should progress to higher levels. The paper, “Testing for Weak Form of Market Efficiency in Indian Foreign Exchange Market”, by Anoop S Kumar, opens the debate about ‘intervention’ to correct any ‘inefficiencies’ in the foreign exchange market. In this process, issues concerning efficiency of ‘free market’ vis-à-vis ‘intervention’ are also discussed.

Our scope for debate gets enhanced as the efficacy or otherwise of “Exchange Rate in a Resource-Based Economy in the Short-Term: The Case of Russia”, is put to test by Vladimir Popov. This paper captures the dynamics of charting a suitable macroeconomic policy amidst volatilities in output (production) and foreign trade. The observation that Russian growth rates were determined to a greater degree by internal monetary shocks rather than external monetary shocks is significant. It is more so because the Russian economy was just making a transition from ‘interventionist’ to ‘free-market’ type and the critical aspects of the study could be viewed against the background of this change. The relevance of internal monetary shocks in investment decisions is borne out by the conclusions drawn in the paper, “Determinants of Foreign Direct Investment: The Case of Nigeria”, by Abu Nurudeen, Obida Gobna Wafure and Elisha Menson Auta.

Their views about the confidence measures that the government needs to keep in place to promote foreign direct investment in Nigeria along with the critical observations in the Indian and Russian contexts as expounded by the other papers prove a point. It is all about understanding—managing ‘intervention’ and ‘free-market’ is the simple ‘monkey-business’ of managing ‘loaves of bread’ on both sides of the balance—as the story goes.

-- Y G Sivaram
Consulting Editor

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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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Monetary Economics