Stock Price and Exchange Rate Interactions: The Case of The Philippines

-- W N W Azman-Saini,
A M Dayang-Affizah,
Siong Hook Law and M S Habibullah

The paper attempts to empirically determine the causal relationship between the stock price and the exchange rate in the Philippines. Having established the stationarity condition of each series using Augmented Dickey-Fuller (ADF), Phillip-Perron (PP) and mean stationary (KPSS) unit root tests, the causal linkage between the stock price and the exchange rate was examined using the Granger non-causality test as prescribed by Toda and Yamamoto (1995). Results suggest existence of bi-directional causality between exchange rate and stock price in the Philippines over the period 1991 to 2001. The eruption of the recent Asian currency crisis, apparently does not affect the causal structure between these two leading prices in the Philippines.

© 2007 IUP . All Rights Reserved.

The DF Structure Models for Options Pricing on the Dividend-Paying and Capital-Splitting

-- Feng Dai

Based on the DF structure models for option pricing (Dai and Qin, 2005), this paper further discusses the DF structure models for three cases, i.e., when the underlying stock is dividend-paid, or when it is capital-split and when it is both dividend-paid as well as capital-split. These three cases are discussed separately, and then integrated in the general models for call and put options. Finally, examples are considered to compare the options prices calculated by the DF formulas and Black-Scholes formulas, and it is infered, that the DF formulas are better than the Black-Scholes formulas. It is also stated that DF formula is useful to traders in the financial market, as it can be conveniently adjusted according to the trading time.

© 2007 IUP . All Rights Reserved.

Economics, Wars and Scandals: Their Impacts on the US Public Approval Ratings of its President Over the Long Run

-- Richard J Cebula, John P Cook and Tarek A Issa

This study addresses the determinants of the public approval rating of the US President for the period 1949-2004. Since the study seeks to identify determinants of the approval rating over the long run, annual data have been used. This model consists of variables reflecting inflation, unemployment rate, and dummy variables for wars and scandals. In this study, the Presidential approval rating is found to be negatively affected by both inflation and the unemployment rate as well as by scandals. The Gulf War had a significant positive influence on the approval ratings, whereas the influence of all other US wars over this period, including the war in Iraq, was consistently negatively significant.

© 2007 IUP . All Rights Reserved.

The Role of NAFTA in the Economic Development of Mexico: Results from Modern Data

-- Stefano Chioetto and Kishore G Kulkarni

The paper analyzes certain crucial aspects like, effect of NAFTA (North American Free Trade Agreement) on the Mexican economy after 13-15 years of its advent and benefits enjoyed by the participants as a result of economic integration. By analyzing the effects of NAFTA, the paper attempts to test the validity of economic theories on international trade. While there are some profuse criticism of NAFTA on either side of the border, it is found that the improvement of labor conditions, in terms of more jobs and a higher wage rate in Mexico, is a significant gain from NAFTA. The paper consists of data analysis and uses some prior theoretical arguments such as that of Factor Price Equalization.

© 2007 IUP . All Rights Reserved.

The US 1990 Clean Air Act Amendments and Wyoming Low-Sulfur Coal Demand

-- Mitch Kunce

The paper analyzes the effect of the US 1990 Clean Air Act Amendments on Wyoming low sulfur coal demand. The demand for Wyoming coal is estimated using an adaptation of Heckman's (1979) two-stage estimator. The results indicate that variation in sulfur allowance prices has little impact on the demand, although it may affect demand indirectly by inducing distant electric utilities to purchase Wyoming coal. Transportation costs appear to dominate the Wyoming coal market accounting for as much as 70% of the delivered price of coal.

©2007 IUP . All Rights Reserved.

Does Tourism Affect Economic Growth? The Experience of Southeast Asian and Pacific Countries

-- Edgardo Sica

Today tourism represents one of the most dynamic economic sectors of the world. Although majority of international tourism takes place within the developed world, recently tourism has increased significantly in the developing countries, mainly in the Southeast Asian and Pacific countries. This study aims to verify if tourism represents a determinant of growth in such countries. Following the recent empirical literature on growth, and mainly Eugenio-Martin et al. (2004), the paper adopts a dynamic panel data model to test for convergence. The results confirm the importance of tourism in economic growth.

© 2007 IUP . All Rights Reserved.

Book Review

Aspects of India's Economic Growth and Reforms

-- Author: R Nagaraj

Reviewed by J Dennis Rajakumar

The book under review is a compilation of the works done by the author at the Mumbai-based Indira Gandhi Institute of Development Research (IGIDR) over a decade or so, on the impact of economic reforms in India. Statistics used and policy implications drawn in this work makes the volume particularly relevant to contemporary debates on drivers of India's economic growth and what can be done to take it forward.

©2007 IUP . All Rights Reserved.