The Developing Economies
Volume 43, Number 3 (September 2005)
■ The Developing Economies Volume 43, Number 3 (September 2005)
■ B5
■ 105pp
■ September 2005
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CONTENTS
Trade Liberalization and Price-cost Margin in Indian Industries / Bishwanath Goldar and Suresh Chand Aggarwal
Who Drives the Russian Financial Markets? / Mirzosharif Jalolov and Tatsuyoshi Miyakoshi
The Technical Inefficiency Effects of Turkish Banks after Financial Liberalization / Nazmi Demir, Syed F. Mahmud, and Senol Babuscu
Book Reviews
The Mystery of Economic Growth by Elhanan Helpman / Masiiwa Rusare
Abstract
Nicolas Péridy, "Toward a Pan-Arab Free Trade Area: Assessing Trade Potential Effects of the Agadir Agreement," pp. 329-45.
On February 25, 2004, a free trade agreement (FTA) was concluded between Jordan, Egypt, Morocco, and Tunisia, as a first step toward the implementation of a larger Pan-Arab FTA. This paper proposes an estimation of the trade potential among these countries. Based on new developments of the gravity equation, we estimate a static and dynamic panel data model, using respectively the Hausman and Taylor, and the Arellano, Bond, and Bover's estimators. Results show that trade flows remain dramatically low between these countries, as a result of high trade costs. In particular, the estimated border effects clearly reflect a significant trade integration deficit in this area. However, there is only a limited export potential between these countries, due to the lack of trade complementarity between them. As a consequence, the Agadir Agreement may only have limited trade effects.
Bishwanath Goldar and Suresh Chand Aggarwal, "Trade Liberalization and Price-Cost Margin in Indian Industries," pp. 346-73.
Using panel data for 137 three-digit industries for 1980/81 to 1997/98, the paper examines the effect of trade liberalization on price-cost margins in Indian industries. An econometric model is estimated to explain variations in price-cost margins, taking tariff and nontariff barriers among the explanatory variables. The results indicate that the lowering of tariffs and removal of quantitative restrictions on imports of manufactures in the 1990s had a significant pro-competitive effect on Indian industries, particularly concentrated industries, tending to reduce the price-cost margins. The paper notes that despite the pro-competitive effects of trade liberalization reinforced by domestic industrial deregulation, the price-cost margin increased in the post-reform period in most industries and aggregate manufacturing, which is attributed to a marked fall in the growth rate of real wages and a significant reduction in labor's income share in value added in the post-reform period, reflecting perhaps a weakening of industrial labor's bargaining power.
Mirzosharif Jalolov and Tatsuyoshi Miyakoshi, "Who Drives the Russian Financial Markets?" pp. 374-95.
By employing the EGARCH model using monthly data from September 1995 to March 2003, we found that financial indicators from Germany rather than the United States are the main drivers of Russian financial markets. In a one-step prediction, the fluctuations of asset returns are well predicted that the prediction errors fall within the prescribed range of the confidence bands. However, EGARCH does not necessarily dominate the benchmark prediction of the random walk model, because with Russia's financial markets constantly in transition and adjusting to frequent changes in the financial system, the usefulness of past data is diminished.
Nazmi Demir, Syed F. Mahmud, and Senol Babuscu, "The Technical Inefficiency Effects of Turkish Banks after Financial Liberalization," pp. 396-411.
The banking sector in Turkey has grown significantly over the last two decades of financial liberalization. One of the aims of the financial liberalization was to improve efficiency through restructuring programs including the privatization of state banks and the encouragement of mergers. In this paper we identify key factors determining the technical efficiency differentials among Turkish commercial banks in the pre- and post-liberalization periods, using the technical inefficiency effects model. We found that loan quality, size, ownership of the banks, and profitability has positive and significant impact on the technical efficiencies of the banks. The results warrant implementation of effective regulatory measures to improve quality of the earning assets of the commercial banks. Furthermore, steps by the government to encourage acquisitions or mergers for private banks and the privatization of the state-owned banks seem to be consistent in improving the overall efficiency of the commercial banking in Turkey.