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Economic Uncertainty, Monetary Uncertainty,
and the Demand for Broad Money in Egypt
--George B Tawadros
Despite the recent implementation of a number of economic reforms and structural adjustment programs to liberalize Egypt’s financial system, this study finds that a stable broad money demand function exists when proper account of asset substitution is taken and an appropriate estimation technique is employed. In particular, the use of measures for economic uncertainty and monetary uncertainty in the formulation of the demand for broad money provides strong evidence that the demand for broad money in Egypt is stable. Furthermore, the results show that both the measures of uncertainty have significant short-run and long-run effects on the demand for broad money in Egypt.
© 2016 IUP. All Rights Reserved.
GDP Structure Effects on Macro-Money Demand:
Herfindahl Index Evidence for India
--Ganti Subrahmanyam, Sridhar Telidevara and Debashis Acharya
Money is a medium of monetary policy transmission. In this connection, no other macro-behavioral function is subjected to more modeling modifications and regression rigors than the macro-money demand function. Monetary policy planning hinges on the parameter estimates of the money demand function. An emerging market economy undergoes structural change in the sector GDP composition unlike a structurally-invariant advanced economy. This is likely to introduce bias in the income elasticity parameter estimate especially. The present study investigates this using the Herfindahl (H) index as a proxy for the GDP composition concentration. The 1-3 years deposit rate and call money rate are alternately used for the opportunity cost variable. Maximum likelihood estimates have shown a statistically highly significant positive coefficient for the H variable besides equally highly significant scale and opportunity cost variables with their expected respective signs. This empirical evidence suggests that the conventional specification contains a serious specification error. The implication of the result is that as the sector GDP concentration increases, the demand for real money balances also increases though quite less proportionately, indicating the absence of any economies of GDP concentration.
© 2016 IUP. All Rights Reserved.
Market Reaction to Listing of Stocks on F&O Segment of NSE:
Application of Event Study Methodology
--V D M V Lakshmi and Medha Joshi
The study aims at observing the impact of listing 106 Single Stock Futures (SSFs) and 31 Single Stock Options (SSOs) on the market value of their respective underlying stocks using event study methodology. The study defines event in two ways: (a) the day on which NSE releases the circular regarding the listing of stocks on F&O segment; and (b) the actual listing day. To test the statistical significance of abnormal returns which are attributed to the event under consideration, both parametric and nonparametric tests are used. There is evidence of positive response from the investors to the announcement and also listing of SSFs, supporting the market completion hypothesis. However, there is no such evidence observed when it comes to options. At times, there is evidence of negative reaction, probably, it is due to their lack of confidence in the probable success of options market. American options which were introduced earlier have been unsuccessful due to illiquidity and replaced with European style of options.
© 2016 IUP. All Rights Reserved.
The Impact of Derivatives Listing on the Indian Stock Market
--Chakrapani Chaturvedula
The study investigates the impact of derivatives listing on stock prices in the Indian capital markets. Significant positive abnormal return around derivative listing is found lending support to the market completion hypothesis. The results support the evidence obtained in the US, the UK and other developed countries that introduction of derivatives increases the opportunity set to invest in the markets and improves the overall efficiency of the capital markets.
© 2016 IUP. All Rights Reserved.
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