Twin Deficit Relationship in a Developing Open Economy

Twin Deficit Relationship in a Developing Open Economy 5.1 Summary. This study investigates the twin deficit relationship in a developing open economy like India. The study strives to demonstrate that Keynesian proposition of a long run equilibrium relationship exists between the twin deficits, but the reversed direction of causality was found. That is the causality flows from current account deficit to budget deficit as against from budget deficit to the current account deficit. This study reveals that the twin deficit have a positive long run relationship between the budget deficit and current account deficit using the Johansen multivariate co-integration approach. The result confirms the existence of a long run relationship between the two deficits, thus supporting the Mundell-Fleming theory and refuting the Ricardian Equivalence Hypothesis (REH). The term â€Å"twin deficit† was initially invented to describe the co-movement between the budget deficit and the current account deficit in the United States (Chang and Hsu, 2009). Afterwards, researchers began applying it to other countries. Ever since, it has become an important area for researchers to examine the causal link between the two deficits and the direction of causality. The coincident of budget deficit and the current account deficits for most countries most especially in the United States (US) during the mid-1980s led to the characterization of this phenomenon as the â€Å"twin deficits† issue as both economic theory and empirical observation suggested a link between the two deficits. The main thrust of the twin deficit hypothesis is that current account deficits of most countries is caused by government’s budget deficits phenomenon and the most suitable way to solve this problem and stabilize internal and external deficits is reducing the government’s budget deficit. In other words, the direction of causality flows from the budget deficit to current account deficit. Two major theories used to explain the causal link between budget deficit and current account deficits are the Mundell-Fleming Model and the Ricardian Equivalence Hypothesis (REH). The traditional Keynesians use the Mundell-Fleming model to explain the twin deficit relationship by arguing that when budget deficit increases, the current account balance will deteriorate as the increases in the budget deficits will lead to increase real exchange rate, domestic interest rates and leads capital inflows and will deteriorate budget deficit. Some group of researchers used the Ricardian Equivalence Hypothesis (REH) to argue that no relationship exists between the two deficits as budget deficits results mainly from tax cuts which tend to reduce public revenue and public savings. They suggest that individuals will recognize these tax cuts as incurring future tax liabilities and thus will increase savings rather than consumption and will not have any effect on the current account balance. In examining the causal link between the two deficits for India, the study carry out the Augmented Dickey Fuller unit root test (ADF) and all the variables were found to be stationary after first differencing at 1 percent level of significance. Then applying the Johansen co-integration method, the study followed the max statistics and maximum Eigen value which stated that there exists at most one co-integrating equation in the model, signifying the existence of a long run relationship between the twin deficits as argued by the conventional twin deficit hypothesis. To identify the direction of causality between the two deficits multivariate Granger causality test was employed. To estimate the short run causality among the variables Vector Error Correction Model (VECM) was employed between the twin deficits and their interacting variables (such as inflation, interest rate and exchange rate) for the period (1990 to 2013). To predict the movements and behavior of two deficit impulse resp onse function was used to traces the impact of one standard deviation shock to one innovation on its current and future value of endogenous variables. The Granger causality test showed a uni-directional causality flowing from the current account deficits to the budget deficits in India between 1990 and 2013. The result of the Wald Test showed that the causality between budget deficit and current account does not exist, on the other hand it has been proved it is the current account deficit which leads the budget account deficit for the India economy. What is the reason it moves from cad to bd write 5.2 Recommendations. From the findings of the study, the following recommendations are given: 1) If government intends to reduce its â€Å"twin deficit† dilemma, it must begin by reducing its current account deficits and this can be achieved by reducing imports, increasing exports or a combination of both measures. 2) Also, since the findings of this study showed evidence of reverse causation from current account deficits to budget deficits, adjustments in fiscal balance can only be achieved through the implementation of strong external policies. 3) It is important for government to equally diversify the sources of national income since the economic transformation will result to minimal fluctuations in the fiscal balance of the Indian economy, thus resolving the â€Å"twin deficits† dilemma. 4) The study found that of all the interacting variables, in which interest rate and exchange rate Granger causes current account deficits. This implies that changes in the interest rate of the Indian economy will impact significantly in the current account balance. So the Central Bank of India must endeavour to consciously monitor the inflation and interest rate in the economy. 5) In reducing the current account deficit, increase in domestic savings is required which in turn requires the development of a strong financial sector. Write more 5.3 Conclusions. The study using modern econometric methods for estimation which showed that the twin deficits hypothesis was valid for the Indian economy as the result from the co-integration test showed the existence of long run equilibrium relationship between the budget deficit and the current account deficit. Also, the study found strong support for reverse causation also known as â€Å"current account targeting† for India. This implies that even the Mundell-Fleming model was valid for India the direction of causality was not from budget deficit to current account deficit but rather from current account deficit to budget deficit. It is evident from the results of the study that the direction of causation is from trade deficit to budget deficit therefore if there is trade deficit then it can certainly cause serious problem for the fiscal policy as well. That is why to avoid such problematic situation prudent steps should be taken to reduce trade deficit by coordination of fiscal and moneta ry policies with trade policy. Higher interest rate and higher inflation reduce competitiveness of our export and consequently deteriorate our trade balances and creates new problem for economy. The economic implication of this phenomenon is very important for the Indian economy. The reverse causality that was found to exist for India implies that if the Indian government intends to reduce the â€Å"twin deficit† phenomenon in India, it must begin by reducing the current account deficits. In other words, policies showed should be geared towards controlling the deficit in the current account most especially by diversifying the export base of the economy by promoting.

Protecting staff through legislation Essay

Understand how equal pay and minimum wage laws affect business Understand the laws against discrimination at work and during recruitment Understand employment rights of workers Understand health and safety laws A minority of small businesses will treat staff unfairly; to protect them is the legislation Act. Equal Pay Act – Created in 1970 the equal pay act means a person of a different sex cannot be paid less simply because they are a girl/boy. An example of this is football; premiership football players get paid well over à ¯Ã‚ ¿Ã‚ ½500,000 yet the players on the girl’s team only get paid a fraction of it. If the owner of a company is doing this he/she would be breaking the laws. Minimum Wage Act – Only enforced 11 years ago, the minimum wage act was made as many companies were taking advantage of people needing jobs and paying them a tiny amount of money. Discrimination Legislation – First introduced in 1976 and then again in 1996 the discrimination act prevents candidates skin colours, backgrounds, religions or even disabilities to be a factor in the owner deciding weather he/she gets the job. Employment Rights – To give employees the right to take sick pay, maternity/paternity leave and holidays. Health And Safety Acts – The right to be safe in the working environment. If this was not a law then if someone is injured for example because someone forgot to wipe water off a keyboard after spilling water onto it and it giving the employee an electric shock then the company could get away with it and blame the employee. Legislation acts are laws enforced by the government. Without them there would be complete kayos. Companies would immediately cut costs and thousands of people would suffer. For example if a company could get a hold of a person to do something for à ¯Ã‚ ¿Ã‚ ½1 an hour when they are currently paying à ¯Ã‚ ¿Ã‚ ½6 an hour they would happily take the other person onboard.

The Key to Successful Awakening Essay Topics

The Key to Successful Awakening Essay Topics Students always go online when they should find something. They should be careful about posting on social media. They should keep their mobile in silence so as to not disturb the class. They should be allowed to pray in school. The Hidden Secret of the Awakening Essay Topics Step by step, you will finish your international warming essay and find a great grade. The teachers don't always assign the specific topic. Evidently, you shouldn't purposely select a topic that will bore your audience. Possessing no notion of the persuasive essay topics, you just do not understand what to write about. How to Choose the Awakening Essay Topics Our life is about words. Things will occur if you continue to reside. Picking the most suitable topic for a persuasive speech may be not such an easy issue to do as it might seem. Speaking about something you understand well makes it a lot easier and enjoyable! There are just a few things that de fine whether an essay you're working on is going to be a good one. Persuade your friend to see the movie you desire. The school day ought to be shorter. Some feel parents ought to be allowed to provide permission for their minor children to acquire tattoos, since they are making the decision for their own children. The Awakening Essay Topics and the Awakening Essay Topics - The Perfect Combination Each idea ought to be developed in a different paragraph. The question could possibly be part of your introduction, or it may make a good title. Before actually beginning to compose your essay, you have to choose an issue to write about. It will be simpler that you compose a very good persuasive essay if it's a subject in which you have knowledge. Up in Arms About the Awakening Essay Topics? Finally, the speaker would like to persuade you to do something. You may trust us to present expert aid for many of your academic writing needs. Bear in mind that you're attempting to make your audience except a brand-new vision of the issue. Though some say totally free public transportation would assist the environment and decrease traffic, others think no cost public transportation is too costly, and the government can't afford to cover it. Actually, you will find dozens of resources on the internet that is going to teach you just how to write persuasively. Demonstrate or give examples to produce the audience understand the way that it works and the way that it solves the issue. Good persuasive essay topics need to be persuasive. Sometimes it is quite difficult to compose your own theme for essay. If you're thinking about how to compose a persuasive essay, you should know that writing an essay is a complicated practice. Always bear in mind an ideal persuasive essay needs to be persuasive. If it's a college essay, it is critical to consider what aspects of it is going to be evaluated. Most issues can have essays on all the aforementioned questions. The Number One Question You Must Ask for the Awakening Essay Topics Just imagine, you have all of the freedom on the planet to write about anything you desire. Revival history is an intriguing topic and one which can be explored at great depths. The awakening proved to be a huge step because it brought all people in the usa together. The fantastic awakening affected the American colonies in a lot of ways. The Downside Risk of the Awakening Essay Topics The important distinction is that the argumentative essay should demonstrate a discussion instead of a single opinion. Persuasive essays are an excellent approach to encourage the reader to check at a particular topic in a different light. The simplest approach to pick out a persuasive essay topic is to talk about a present issue. A student ought to keep in contact with the hottest trends and know which persuasive essay topics are related to sound convincing in regards to defending personal opinions. Discover which of the topics, you currently have a fairly good background on which will make it possible for you to have a relative edge. You're a true topic enthusiast! Any idea can prove to be a wonderful foundation for a topic. Regardless, it's always a better idea to work with a topic that is very close to you and that you are in possession of a genuine interest in, instead of just picking a random topic. the Awakening Essay Topics Fundamentals Explained The revival meetings weren't smallish affairs. Though people believe education is a correct and will make society, overall, a better place for everybody, others feel there's no real way to provide a free college education as colleges would still have to be funded (likely through tax dollars). Since you can see, a lot of the topics listed are new and tackle the present issues happening in the World today. The major topic that's expressed throughout the story is feminism, the practice of producing equal rights for both women and men. At the exact same time, it's a fantastic persuasive essay idea. Possessing great research abilities and selecting a superb topic is vital. Overall, you can observe that writing a persuasive essay isn't a brain surgery. Just adhere to the guidelines stated above, and you're going to be well on your way to writing a very good persuasive essay. the Awakening Essay Topics - Dead or Alive? To begin with, if you're arranging a persuasive speech, you ought to think about a topic that may create mental pictures in the minds of your audience. The church hierarchy needs to be leveled out to none and everyone ought to be welcomed. So, the best method to compose a terrific persuasive essay is to locate a theme you're familiarized with and would like to share your experience with the reader. The use of the essay is to select an argument and attempt to persuade the reader to adopt it.

Newton s Laws Of Motion - 1561 Words

Newton’s Laws of motion has influenced the safety aspects on cars in a revolutionary way and has very much acted as a backbone of its development over the past century. Since, the invention of the first functioning car in 1885 by Karl Benz, the conception of a car has been completely transformed, from its design and engines to its safety features, everything has been entirely transmuted. Correlating the first functional car to the automobiles of the current period, the evident dissimilarity between the two are vast. The major features comprised within the first two-seated gasoline powered vehicle was the compressed high-speed single-cylinder four-stroke engine with an output of 0.55 kW and maximum speed of 16 km/h (ScienceIQ.com), as shown†¦show more content†¦Exemplifying this in a real-life context, if a tissue box is positioned on the back dashboard and if the car approaches to a sudden stop, the tissue box would fly forward and could potentially injure the occupan ts of the car. This example correlated to the Law of Inertia and seat belts because the car was travelling at an excessive speed, and when it came to a halt, the law of inertia made the tissue box fly forward as it continued to travel in its same motion, but if the tissue box was stationed by an external force, it wouldn’t fly forward. The major role of Seat belts’ in a collision is to prevent the passenger from moving around inside the car. After detecting an impact, the seat belts lock in place. At the point when the car collision occurs, there is no unbalanced force acting on the passenger, so they are jolted forward onto the windscreen as stated by Newton s First Law. The seatbelts cause a controlled deceleration of the person, reducing the brutality of the injuries. As shown in Figure 2 in 2008 alone, more than 255,115 lives were saved as a result of seatbelts and since 1975, it has saved over 2,000,000 lives, proving its significance (Emaze.com, 2016). Eventhough Newton’s first law has inclined the introduction of this feature, Newton’s second law has also made a significant mark on safety aspect of cars. Newton’s second Law of Motion, which states that the larger the