and is shown as the ONT series in. Table l(A). This was then combined with the nontraded goods series. (NT) to give us our composite nontraded goods series.
Revised:
July
CLOSEDTO OPEN ECONOMYMACROECONOMICS: THE REAL EXCHANGERATE AND CAPITAL INFLOWS INDIA 1981-1994
FROM
bY Deepak La1 University
of
California,
Los Angeles
and D.K.
Joshi
NCAER, New Delhi
of Economics UCLA Dept. Working Paper #715 July 1994
Address for correspondence: 2 Erskine Hill London NW11 6HB, ENGLAND Tel/Fax: 081-458-3713
NCAER Parisila Bhawan ll-I.P. Estate New Delhi-110 002, INDIA Tel: 331-7860 Fax: 91-ll332-7164
1994
INTRODUCTION With Manmohan ent
the
opening
of
Singh
reforms,
macroeconomic
analytical
framework
framework that
Pohit
e.g.,
integrates
the
framework
(see
apply
has
real
and
variables
Salter,
since
relevant
1991,
see a large
but
monetary
explain
identify
the
macroeconomic
increase
in
capital
framework
in
to
to
useful
aspects
to
India
discussions
for
a
small
(Ch. the
key
balance
in is
India
the
(see
so-called
economy
which
equilibrium
This
paper
attempts
of
major
economic
evolution policy
"structuralist"
general
17)).
Rao-
in a differ-
open
a simple
La1
Narasimha
economy
policy
model
Harberger,
the
to be examined
closed
very
Corden,
and
in determining
needs
characterized
payments
framework
following
essentially
A simple of
economy policy
the
hitherto
balance
this
Indian
from
and Bhide).
"Australian"
to
the
instruments
in an economy
which
which
are
is likely
to
inflows. I.
The Australian presents simple
a geometric algebraic
traded
prices is
set
"small"
and
traded are Pan)
and
nontraded
these
in
model,
India,
so Fig.
whilst
aggregates (NT).
1 and its
Appendix
III
into
two
effect
demand
It
is
useful
those
Assuming
two tradable
goods,
former
assumed
terms
(supply) the
(X).
--
its
in
between
commodities The
prices
changes
prices.
commodities
for
cannot
Excess
equivalent
exportables
the
model
international
and hence
international
of
the
by
subsidies.
through
outline
known,
(T)
are
may be unfamiliar
note
contains
a
formulation.
As is well --
model
of
for
trade to
which
are
trade
these
and fixed
--
at,
tariff
domestic country
and any trade is
amongst
currency
the and
CM)
mediated
group
those
prices
cum subsidy
taxes
constant
ex hvpothesi,
importables foreign
groups
as the
commodities
differentiate
constant
whose
to be given
account
are
goods
large
(p rates
of
which *x (t,s),
and
they
can be aggregated
domestic the
currency
domestic
currency
price
of
rate
commodity
the
of
and
the
that
one good
composite
nontradable,
but
goods
by prohibitive
price
of
the
This
(l-b):
exchange to
rate
traded
tradable
goods
good
the
key
(er),
real
Economic
Survey),
nominal
the
composite
in
the
which
composite
not
have
been
only
tradable
converted
are
into
nontraded
The domestic
currency
the
Australian
model
of the
domestic
in
which
goods
demand
ratio
cum
(1)
by domestic
as the
foreign
tariff
be set
price
(e-
- e*p*T(l+t)
comprises
will
rate
the
(pN)
N = P /[e*p
rate
*T
to
(usually
(ep> which
exchange
price
needs
and supply. --
prices
the
real
of nontraded
is based rate
levels
(pd,
f or
Pan).
price
(pd)
of nontraded
goods
(pN)
be
with
(7-j
distinguished in
on purchasing
(e)
The domestic
level
(l+t>l
reported
*T
(l-a),
currency),
quotas.
d ep -P/~.P
of
exchange
import
defined
exchange rate
foreign
nominal
whose
(T),
goods:
exchange
the
tradables
or binding
relative
er = pN/pT This
and
+ (l-b)p*m(l+t)]
tariffs
yields
(P*T)
importables
good
nontraded
foreign
exportables
nontraded also
of
of
PT = e[b.p*x(l+s) The
labelled by the
unit
share
of
good
determined
composite
So if
b,
is
value
(t).
is
a composite
(PT)
currency
price
subsidy
into
the
from
official power
difference
the
real
effective
publications parity
e.g.,
the
(PPP) and corrects
between
the
domestic
and
so: (3) is
a weighted
a weight
say of
average
of
"a" , and of
the
domestic
traded
goods
prices (pT)
hence: Pd - a 0 pN + (l-a)pT
(4)
4
From
(1)
to
(4)
we therefore
have,
ep = (l+t)[aeer+(l-a)] The
PPP real
effective
real
exchange
"law
of
will
changes
exchange
rate
the
changes
with
respect
therefore the
in
real
the to
d = (l+t);
in
tariffs
(6)
will
the
PPP real
for
movements
will
the
index
(WPI).
series
is
series
which
series
are It
the
real
the
ence
given
in
nontraded
good
final
that
the
and
the
(t=O).
Nor
be surrogates
for
differentiation
of
(5)
of
in
consumption
real
the rate
Appendix the
1 for
I.
nominal official
rate
(er
from
(2)
a cut
but
from
> O),
rate
(ep < 0).
therefore
be taken
the
real
exchange series
Movements
in
to be proxies
The and
period
real
exchange on the expenditure
data
rate
from
on these
Fig.
price
exchange
rate
exchange
rate
The
three
2.
some important services,
exclusion
National other
our
1993-94.
indices, the
India,
wholesale
effective
to
include
for
real
in
1981-82
this
the
resulting
and miscellaneous To see if
rate
from
statistics
the WPI does not
composite.
grafting
cannot
Thus
rate.
housing
computed with
logarithmic
exchange
rate
from
Table
transport,
our
no tariffs
necessarily
exchange
exchange
with
available
viz.,
to
done
along
be noted
experimented private
are
effective
a real
is
real
available
to derive
charted
the
exchange
are
This
are
k = er[aoer+(l-a)].
exchange
should
services of
is
rate
(a=O)
goods
to
(6)
raise
PPP real
As no estimates task
there
For
(l/x)(dx/dn);
effective
first
if
be equal
d
(d < 0)
in
only
yields:
x'=
lower
and
rate.
thus
no nontraded
exchange
exchange
ep=koer+
where
are
holds,
will
(ep>
there
effective
real
time
rate
if
(er> ,
one price" in
(5)
nontraded
which makes
based
on
Income nontraded
are
part
much differthe
WPI,
accounts goods
we for
(ONT).
5
This
was done
as
follows.
these
three
nontraded
Table
l(A).
This
give
us
share in
our
goods
composite
final
the
included
these
goods
NT,
in
consumption
that
ONT and
share
and
the
of
would in
(l-a
2
series
for
with
these also
the
the
a2,
the other
have
(NTS) and of
the
nontraded
goods the
"s" ,
this
the
series
follows. other
NTS series
(NT)
nontraded is
the
the
and
"s" I
WPI if
by
is
to
goods
weights
be given
in
Given
data in
for
ONT series
respective
WPI would
From
as the
as
accounts
been
deflator
goods
national
"corrected"
/l+s)T.
implicit
nontraded
series
WPI is from
the
and is shown
goods
data
T series
(s/l+s)ONT,
combined
nontraded
goods
assuming
the
was constructed,
was then
of nontraded
the
First
it
had
of
the
(a2/l+s)NT,
readily
obtained
as: NTS = [(a,/s)/(a,/s) The value WPI (see following
s
from
the
Appendix)
is
0.74
till
weights
for
national 1991-92,
combining
the
+ 0.29
From
1992-93:
NTS = 0.68NT
+ 0.320NT.
labelled
ers.
l(A),
and
2(A).
As
is
Hence
our
derivation
be fairly
it
is
Its charted
apparent
computed
index, along there
of
the
from
this
thereafter.
This
NTS and the
changes
in
with
er
(based
not
much
real
a2
from
the
gives
the
ONT
and
is
and for
NT and ONT series.
NTS = 0.71NT
rate
is 0.3,
and 0.64
1991-91:
exchange
+ [(s/l+s)/(a2/s)+(s/l+s)]ONT
accounts
Till
The real is
of
+ (s/l+s)]NT
exchange
its
values solely
difference rate
traded are
based
given
on the
between on the
good
WPI)
the
two
WPI is
series
in
in
Table
Fig.
series. likely
to
robust. II.
The equilibrium of the
economic
system
value which
of the
real
is determined
exchange
rate
by real
is an endogenous economic
fundamentals,
variable like
6
the
pattern
of
growth,
this
the
tions
from
fiscal
policy
cannot
persist,
as they
return
the
to
(see
Edwards).
is
this
initially
in
in
PP.
At
will
its
the
internal
and
the
and domestic
OEOT
in
terms
of
slope
of
the
increased
common
their
expenditure have
to
point
shift
vertical
inflow
goods
being
the
goods
must
have
to
right
between
to the
capital
will
have and the
necessarilv
capital been
model
in
at
A,
equal
A.
capital
the
rise,
where
not
will
changed
the
production
highest
possibility
and nontraded
exchange
rate
output
of
is
goods (OYOT =
given
by the
as
expand.
As part
of the
the
and
demand the
the
trade
deficit,
way the
transfer
resulting
deficit
are of
the
increased There
and
production
The
The
production
the
In this
on nontraded
deficit.
new equilibrium,
absorption
BC.
be spent
a trade
Moreover
trade the
they
The economy
expenditure
as the
effectuated.
accompany
1.
domestic
will
through
two comprising
accompanying
Fig.
but
which
have
traded
inflow
and
above
inflow.
the
possible
in the
vertically
--
and
erl.
appreciation, of
to
The real
met
be in balance lie
the
makes
on traded
exchange
of
both
monetary
effects
fundamentals
to
Devia-
misalignment
the
for
is a sustainable
must
equal
must
A,
price
distance
appreciation,
at
relative
exactly
They
tangent
domestic
if
and supply
good).
by
inflows.
countervailing
balance
is
capital
rate
tangential
output
this
to
will
external is
tradable
there
be a real
nontraded point
the
expenditure
goods,
depiction
demand
caused
exchange
level
curve
and net
be
in motion
equilibrium
balance,
Now suppose
real
set
consider
A
can
labelled
indifference
curve
of demand
level
usually
rate
attainable
is
equilibrium --
To see
pattern
consumption supply
equilibrium capital
for
new consumption point,
real
will
with
which of
the
exchange
the
will
be
foreign rate
phenomenon. inflow.
But
suppose
domestic
than
that
a further
the
"excess"
price
will
this
leads
of
at
supply
of
nontraded
ables
which
will
equal
to the
excess
(both
measured equal
inflow
cured
exchange
to
as before
are
capital
C
production
the what
fundamentals
balance.
depreciate
(and monetary
in
vertical
and/or
is
It
deficit In
slope
difference the
slope
C,
and
demand
demand
for
which
is
and trad-
exactly
output
OYT
expendi-
because
the
to
the
to unlimited
(BE)
will
the
process, level
have
be
real to
2'
a point
the
on the the
inflow
to
the er
between
capital
that
the
the
access
of
of
relative
corresponds
misaligned
by the
equals
at
sustainable
not.
part
and excess
Without
its
is
domestic
deficit
lead
PP
consump-
(and
hence
enable
us to
BC. rate
an open
hence
from
CE, over
GTE+).
the
of
exchange
extent
trade
given
just
is
policy.
drawn)
where
deficit)
OE$
trade
ETE+ = BE
expenditure
point
real
of this
by
excess
of
(BC - YT ET>
this
is
is
will
given
and hence
deficit
expenditure of
C,
that
Assume
Production
There
a trade
it,
excess
1.
rate
so that
whose
equilibrium.
exchange
Fig.
and monetary
((not
trade
in
inflow
finance
and
real
goods,
run
above
Part
er*
will
the in
into
fiscal
to
A
a new short
The excess
loose
rate.
on nontraded
vertically
over
the
exchange
spent
lines
goods
it.
real
be
of domestic
level
equilibrium
the
of
to
and
countervailing
For
have
tion
the
demand
rate
between
to
excess
the
curve
judge
This
reducing
equilibrium
Using
inflow.
is
tradables).
reserves by
capital
which
in
from
foreign
by the
ET EN
spill
finances
injection
an amount
establishment
E,
demand
'by
to establish
and
aggregate
output
will
YT YN
expands
domestic
expenditure
the
addition
than
of
to rise
in
greater
appreciation
to
consumption
is allowed
have
the
ture
government
expenditure
larger to
the
are
as a diagnostic economy, unavoidable) fiscal
policy
its
tool, movements
will
represent
or misalignment corrections).
thus
changes (which
require
in
8
Secondly, depend
to
the
constant,
trade
taxes
the
in the
II a II
are
As we have
by
seen
effects
of
the
changes
in
taxes
(t> *
excess
demand
the
real
trade of
the
For,
is
(t).
tradables rate
can
nominal
from
(4)
without the
in
cannot
in
control
from
in
the
there
pressures
requisite
crucial
er.
er
nominal
monetary
It
domestic
exchange
rate
in net
and/or
the
relative
growth
nontraded
goods
Fig.
1
production
--
outputs that
the of
induce. effects
the
changes of
(for
profitability prices
of
is static
producing
Given will
the
and fiscal
exchange
determinant
are
come
about
rate
and
assuming
can however
on the
is an increase
(t' < 0),
monetary
real
Thirdly,
in
taxes
any undue
(P*T)
that
(7)
change
suppose
trade
from
+b+t
fiscal
capital
rate
changes
the
(or the
real
shifts
case)
the unavoidable
trade with
We know from
the
are
exchange in
on the --
two
which
and/or inflows,
From, rate
level
Thus
(Pd)
(7) (e'
0 ). there is an equivalent appreciation of the nominal exchange reduction
with
For
exchange
(2 ) and
will
followed
taxes
exchange
goods,
of them.
policy
This
we have:
changes Thus
and prices
of nontraded
required
countervailing
process.
on what
(e)
currency
price
inflationary
above
rate
government
the
(2)
foreign
constant
.d P = Br
the
and
or some combination
and
the
(1)
exchange
requisite
changes
influence
from
that
the
through
*T
also
nominal
assuming
(21,
will
as can be seen
respect
P
it
the
changes
be unavoidable.
static
production
through goods
rate
the these in the
will case)
determine
the
of
and
traded
possibility relative
curve
changes
changes
in
their
real
exchange
in
PP the
relative rate,
these
III. We next
seek
to
1981-84
in
terms
of
version
of
the
model
model's
central
supported
explain the
the
Australian in
Appendix
assumption
by econometric
changes
in
model.
Attempts
III
that
were
money
analyses
the
real
foiled
because prices
Indian
rate
to estimate
determines
of past
exchange
data
the
the
algebraic
monetary
does
(see
between
not
e.g.,
sub-
seem to be
Balakrishnan;
Nag & Upadhyay). So
instead
we
represented
by Fig.
the
in
the
1,
it
is
to
net
in
changes Fig.
related
evident
that
(M-X)
= YTET,
trade
deficit
- K.
Normalizing
then the
share
percentage that
both
data
for
the
1990,
(and
(M-X)
capital
of
"excess"
the
the
real
standard
national
the
data
any
net
capital
deficit
and the
inflows
in
GDP
in
GDP
variables
would
given
BC. by the
inflow
exchange
have
positive
expenditure
as the
is
>
and with
signs.
is
deficit
between
that
(er)
it
trade
the
ED = (M-X)
as ratios
(DED = A(ED/Y)
model
identities)
rate
A(V)
explain
be positively
difference
(K) ,
model
simple
domestic
But
the
could
will
accounting
capital
(DKY -
it
From the
"excess"
inflow
real
of
see if
(er>
income
(ED)
in
to
1981-94.
ED = EB = YIE+demand
version
exchange and
changes
demand
the
between
W-1
trade
estimated
and
it
to
inflows
and
simplified
of
GDP, we
by changes changes the
in
in the
expectation
Table
2 gives
the
variables.
correct
1991,
that
excess
the
of
Inspection
the
rate
and that
to explain
significant, data.
1,
we have
these
fit
exchange
apparent
independent
Whilst had
real
K = BC,
sought
to
1 econometrically
capital
From Fig.
(ED).
sought
equation
signs
on the
the
overall
of the
data
was anomalous.
for
the whole
independent
variables,
regression revealed Estimating
of the the
represented that
for the
sample
the
1981-94,
coefficients a very
three
relationship
period
bad
"crisis" without
were
not
to
the
fit years
1989,
these
years
10
yielded
the
following
kr
[RI1
regression
=
0.02 (0.008)
obs = 9; (figures The results
using
[R21
the
+
equation:
3.07 (1.35)
DKY +
2.08 (2.25)
DED
R2 = 0.39 in brackets
; R2 adj - 0.19; are t ratios).
ers
for
series
the
real
DWS = 1.75;
exchange
rate
RHO = 0.53
series
were:
6rs = (834 + (?:t6jDy + &i8)DED obs - 9;
There
is
not
exchange
much
rate
R
= 0.39;
difference
from
the
WPI
R
adj
= 0.19;
the
results.
between (er)
as our
DWS - 1.75;
RHO = 0.075
So we shall
"correct"
er
in
use
the
the
rest
real of
the
paper. Fig. exchange points
3,
charts
rate
(er).
fairly at
robustness
through in
From changes the
in
observed
The
well.
significant
outlined
the
estimated
Moreover
the
5% level an indirect
Appendix
the
predicted
equation
though
seems
the
(whereas
to
on
on
DED
based
in
pick-up
coefficient
that
derivation
,changes
is>,
the
is
not
check
its
of the
(A.12)
we can
the
exchange
rate
derive
the
and various
following
model
parameters
relationship
between
(see Appendix
III
for
derivation).
Br - pn = [(a3.Y/N)/(nd+nS(l-a2)]d(K/Y) where
real
turning
DKY
we can
on the parameters
the
III.
equation real
and
a3
- proportion
N/Y
- Nd/Y
of
foreign
- NS/Y = share
capital of
(A12b)
inflow
nontraded
spent
goods
in
output. nd
- elasticity
of
demand
for
nontraded
goods.
ns
= elasticity
of
supply
for
nontraded
goods.
on nontraded domestic
goods.
consumption/
11
= marginal
a2 From
an
propensity
estimated
coefficient
to
consume
equation
import
in GDP is 0.10.
nontraded
for
the
The estimated
goods.
period
equation
1981-94,
was,
with
the
import
I (imports)
and
Y (GDP):
I = -3507
Assuming
that
yields
(2.04)
0.10 (19.5)
foreign
capital
for
a guesstimate
for
The marginal equal
to
1992-93
the
share
is
1991-92,
d
the
goods)
but
two
we have
lower
and
from
lies
composite
substitutes
the
of
of
nothing
between
0.5
the
coefficient
in
the
nontraded from
the
for
WPI.
RHO = 0.059
is higher,
goods,
a2
Till
values
nothing
say 0.25,
is
taken
1991-92
to
be
a2 = 0.74;
to
these
d
to
1992-93,
of
to
Y/N goods
goods)
a2
(the
go on to
them
in
total
output,
= l/O.64 will
so
till
- 1.56.
be given
x elasticity
by
of
substitution
goods.
argues
n
goods
nontraded
traded
is
estimates,
We have
Applying
goods
commodities
these
1992-93
on traded
of nontraded
and
between
of
spend
demand
Harberger
large
good
of
have
substitution.
to
- 1.35;
nontraded
We already
DWS - 1.597;
propensity
0.75.
of
in expenditure
between
this
of
share
= l/O.74
= (l-share
- 0.989;
a2 - 0.64.
The elasticity n
R2 inflows
of nontraded
also
Y/N
Y
a3
propensity
and after
a2
+
share
estimate
the
that
the
elasticity
such
as
traded
likely
yields
to
elasticity
substitution
nontraded
between before
of nontraded
requisite of
and
lie
a value
in expenditure
0.5
between
goods and
1991-92
of
of
1.0.
without Taking
nd = 0.13,
- 0.18. go on to
provide
an estimate
of
ns.
We assume
it
range
of estimates
1. values (g)
in of
(A12b), DKY,
we get as the
the
following
determinant
of
changes
in
the
real
12
exchange
rate:
er = g
l
Values
of
n Till
1992-93
have
the
2.2
on our
is
equivalent
the
It ratio
to
of the
Table
PSBR
to
(M-X)
relationship
to
improving years
Rajiv
Gandhi
with
the
rade
deficit.
real
exchange
were
steady
in
the
this
reduced
range,
form
ran
for
and we
estimate
of
had
any
whole
becomes
beginning
of
there
the is
thence
changes
economy growing on the
sample
in
and
undertakings. changes
ratio
in
of the
the
trade
was no significant was a steadily
after
1988)
after
we find
budget
deficit,
between
the
level.
the
outlays
there
what
price
borrowing
total sector
we seek
period,
up of
link
sector
there
opening
the
deficit
between
Whilst
significant
So essentially of
and
the
the
gap between and public
1981-94.
deficit
public
regressions
and the
the
of
the
as the
We then
fiscal
termed
governments
(which
opening Hence
within
The measure
is
U.K.
obtained
two for
government.
rate,
the
is
4.
the
the
lies
government's
demand.
GDP (DPSBR)
relationship
These
"excess"
GDP (DMXY)
between
RI of
the
and state
in
in
applicability
whether
This
central
reported
deficit
the
of what
the
estimated
India.
of
(PSBR). of
is
DKY for
measure
requirement receipts
of
we examined
effect
=1
3.3
model
Finally,
n s
2.6
some support
Australian
when
3.9
The coefficient thus
g
= 0.5
S
1991-92
After
DKY
the
economy
(see
Table spills
budget
deficit
1985-86. under 5) over
is
the that into
a
and the
13
IV. We can now briefly model
for
the
relevant of
three
fiscal
and
monetary of
of
accompanying
the
to In
give
a small
devaluation
currency
prices
nontraded
our
1993-94,
of
exchange only flowing real
rate
required
about
exchange It
goods
was offset
from rate
of
in
Rl,
9%.
should
major
way of preventing
have
However,
in
be noted the
large
by
by nearly
still
substantial
exchange
continuing
but
rate
6% (the
rise
in
had
to
result
the
occurred
of
foreign
reduction
adjustment
the 14%,
inflows,
and
a
large
capital
rate
their
the
capital
required
this
in
net
with
a rise
which
given
exchange
rate
positive in
the
foreign
rise
currency
a rise implicit
appreciation
inflows, a real
reduction Given
required that
the
was required.
by only
in
by a substantial
rise
so
that
rose
the
rate
increase would
appreciation
about
by
real
of
9%.
appreciation. the
goods
exchange
but
in net
so the
exchange
offset
over
4.5%.
a modest
largely
traded
was a large
estimate
appreciation
nominal
prices there
elasticity
the
real
decline
inflows
offset
rose
depreciation
demand,
of
traded
rate
the
both,
Given
prices
of
effects
in
was partially
goods
our
the
net
a decline
by a smaller
small
"excess"
requisite
goods
exchange
the
from
values are
was entailed.
which
rise
the
from
was
rate
traded
to
prices
of
the
taxes,
real
in
there
emerges
variables
demand
rate,
was a further
as the
of
1991-92
which
6 gives
(exogenous)
exchange
small
Table
"excess"
had
story
reforms.
exchange
prices
increase But
real
in trade
there
taxes),
the
In
nominal
the
1992-93
appreciate.
macroeconomic
overall
the
goods
a substantial
In
the
reduction
and so nontraded amount
since
policy.
depreciation
devaluation
the
The two independent
capital
and
small
in
years
variables.
foreign
trade
outline
in
impact "excess" in
nontraded
deflation of
the
real
real which
goods the goods
in
the
demand,
traded values,
on
1993-94,
exchange
prices
requisite prices
of
was the rate
that
14
would
otherwise
transfer
of
foreign
embodied
effects?
governed
by
weather,
the
in
exchange
real the
terms
we have
recent (and
sectors
expect
the
would
of
tradable
has
in
thinking
absorbing Indian
that of the
economy. of
the
capital
the
the
should
be
the
large
full
rise
of
from
in
goods
sectors,
but
1992-93
the
data
would
(as
it
in
(Table
Table
of
1993-94
divided
As we would
7.
would
depress
goods
sectors
should
the
the
tradables
roughly
in
and
As
into
nontraded
is)
industrial
Survey
goods
shown,
1991-92,
manufac-
sectors.
we have
as shown
relative
traded
Economic
category),
changes
in
and
capital
and deflation
rate
reflected
the
output
price
industrial
many
of
relative
of changes
various
converted
depreciation
agricultural
of nontraded
However,
April-Ott
growth
of
growth
the basic
the
that
a classification
tradable
be reflect-
demand
be expected
boost
of
to be higher
goods.
hopefully
been
about
open,
effects
appreciation
goods
Enough
deployment
of
nontraded
increasingly
was
Assuming
and nontradable
exchange
for
have
rates
in
exchange
than
of
has
By contrast,
that
rates
growth
into
Tradable
latter
on
those
real
of preventing
counterpart
movements
categories.
also
1992-93.
model
these
growth
boom. the
or
we do not
of
real
rates
rate
liberalization
possibly
these
form
the
outputs
data
trade
was a means
whose
output
in
6.4)
effect
reserves.
Unfortunately
output
the
inflows,
the
in
tures.
in
relative
movements
ing
capital
the
of
still
the
This
exchange What
is
occurred.
to both the
model
foreign may
variables
purported
wall
of
past
inflows.
to
show
macroeconomic
policy
In the
said
to
utility
policy
trade also
the
in
of
usefully
maintain
economy
which
is
It
is with
respect
to
money
the
economy
absorbed
This
rose
to
employed
to
macroeconomic
foreign
about
which
Australian
an
and capital.
be
the
is
balance
seeking
less
than
2%,
in
consider
a home
l/2% the
the whilst
in
the
of GDP in
the
mid-1980s.
In
15
1993-94,
the
inflows
double
over
fiscal
policy
is
absorb
these
inflows
whether
this
prices
that
or
and
in
e)
and/or
the
requires
those
in
exports,
relative
tariffs
on importables,
of
net
through
traded of
trade
of
this
For of
also
increase
will
The
an
the
well and
appreciation
(2)
makes
in
nontraded
to
clear
as
is
clear
rate
economy
seeking
nominal
is
goods
exchange
(fall to
exchange
this
end.
However,
be
reduced
by
the
could
monetary
latter
nominal
taxes.
can
rate
a rise
the
tradables
and
do,
as
goods.
in achieving
price
they
choice
an appreciation
may seem to be counterproductive the
about
They
GDP.
exchange
The only
an appreciation
reduction
clear,
If real
comes in
4% of
future.
unavoidable.
a fall
of
be about
a substantial
is
growth
to near
appreciation
(7)
the
in
neutral,
through
(2)
estimated
level
real
from
promote
are
rate
as (1)
reducing
relative
makes import
profitability
of
exporting. Moreover,
India
tradables
through
exports.
Nearly
QR's
and
requisite fall
in
exchange
then
equations)
done
inflows
over
consumer
goods
goods
by
prices
maintaining the
materialize.
last
of
are
average
exchange
months
The required
relative
induced
capital
inflows, with
is
the
of
baggage
required
goods
the
the
required nominal
into
traded
(a,,
and
multiplier
rate by
an unchanged
nontraded
on nontraded
of
By removing
the
as
these
reducing
to
on them
even
price
profitability
close
by
the
at present.
tariff
tariff
goods a3
effect
of
in any
rate.
a relatively few
the
can be obtained
thereby
reducing
non-tradable
expenditure
real
painlessly
improving
by converting
fall,
on the
way
a uniform
movements
domestic
will
say the
Furthermore
inflow However,
whilst
exchange
of
other
route
reducing
rate.
our
one
them
tradable
proportion
has
all
real
the
capital
this
replacing
(100%) I and
has
constant will real
not
nominal be viable
exchange
rate
exchange if
the
appreciation
rate
as India
large
capital will
fuel
16
inflation
in nontraded
policy
remain
therefore
likely
is
to
foreign
a vital
receive.
banks
is better
than
risk,
as with
direct
be easily
investment implicit
or
be
crisis
nominal
exchange
rate
making
currency
risks
moreover by
choke
depreciating
if
government
until has
to have
should floating
their
investments.
in
turn
etc.,
equity given
an
can
suffer
a
By contrast,
if
it
both
the
can mediate
the these
investment
A fully
and
floating
and prevent
bullish
which
are
then
by appreciating,
sentiments
will
the
attained
a fully
effects
which
floating)
of
investment
latter,
country
averse.
share
inflows
market
investors
investors with
these
If
turn
form holding.
the
the
factories
relied
likely
some of
the
past
equity
actual
then
on direct
the
most
most
rate
divestments
or
bearish
about
is
reformed,
the
prospects.
However,
the
foreign
of
guarantee,
is
relied in
unlike
lending.
(ideally
regime
India
foreign
bears
of
sentiments
is flexible
of
However,
as bank rate
the
form
lender
have which
rates,
consists
exchange
that
which
countries
as the
market
associated
will
country's
if
the
Singapore
the
and monetary
future. inflows
interest
as it
of fiscal nominal
capital
investment.
exchange
exchange
by
and
borrowing
stance
the
American
as volatile
explicit
of
to be in
foreign
the
for
type
likely
bank
foreign
flows
the
liquidated,
can
matter
China
is
if
an appropriate
at variable
inflow
This
cannot
of
or many Latin
from
capital
by
Unlike
investment,
foreign
even
policy
accentuated
on borrowing
prices,
The choice
neutral.
becomes
This
goods
exchange
In price
accompany
a reserve rate.
in
rate.
domestic
necessarily
consider
financial
a balance
floating
on the
domestic
target
the
system public
that
case,
level
of
large ((say
finances,
it
as a second the
capital a year
real
inflows, of
maybe
best,
exchange
to
the in
the
imprudent
rate
perhaps imports)
and
mitigate changes
government
managing
its
17
Finally, exogenous,
though they
interest
rate
investments). fully policy, managing
integrated
likely
this
paper,
to be determined (as
Once financial
liberalization
the
rate
macroeconomy.
global
policy
well
as
economy, will
inflows
capital
differentials
into
interest the
are
in
become
have
by domestic the
rates
is completed,
an
with
taken
and international
different
along
been
and the
exchange
important
of
policy
rate
as real
return
on
economy
is
and fiscal variable
in
BIBLIOGRAPHY
Balakrishnan,
P.:
Pricinp
and
Inflation
in
India,
Oxford
University
Press,
1991. Corden,
W.M.:
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Inflation,
Oxford,
Edwards,
S.:
Theory
Harberger,
and Monetary
Evidence
Economics,
vo1.29, A.C.:
Lal,
D.:
D.
in
a World
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Real
Lal:
Edward
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Brunner
1970s:
and
A.
Crisis,
Behavior: Development
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(eds.),
121,
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1982.
and
of
Stabilization,
Meltzer
North-Holland,
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Framework
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1985;
20th
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Lal:
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the
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of
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226-38.
and
19
TABLE 1 Comparison of REER, NEER and eR NEER
REER
eR
NEER
REER
eR
Year 1981-82 = 100 1981-82 1982-83 1983-84
100.0 101.2 101.7
1984-85 1985-86 1986-87 1987-88
98.0
100.0 96.8 99.8 96.5
95.1 82.9 78.4 73.0 69.7 64.9 50.7 48.3
1988-89 1989-90 1990-91 1991-92 1992-93 1993-94
1981-82 - 100
100.0
91.9 86.4
1.18 0.49 -3.61
-3.17 3.05 -3.26
94.1 86.4 81.7 77.0 75.1 72.3
91.3 90.3 89.2 83.9 84.7 83.2
-2.93 -12.83 -5.46 -6.90 -4.51 -6.87
-2.55 -8.18 -5.39 -5.79 -2.48 -3.62
61.4 63.4
83.2 86.4 87.8
-21.88
15.08 3.18
96.4
-4.78
-3.61 -4.66 -6.00 5.71 -1.07 -1.24 -5.92 0.95 -1.79 -0.05 3.88 1.60
SOURCE:RBI NEER : NOMINAL EFFECTIVE EXCHANGERATE REER : REAL EFFECTIVE EXCHANGERATE eR
:
REAL EXCHANGERATE (DERIVED AS A RATIO OF WPI IN NONTRADEDTO TRADED GOODS)
20
TABLE 1A Inflation
and Real Exchange Rate (eRs) in Traded and Nontraded Goods
WPI
Real Exchange Rate(eRs)
% Change
INDEX YEAR (1)
TRADED
1981-82
100.00
1982-83 1983-84 1984-85 1985-86 1986-87
107.37 118.95 131.30 132.70 141.26
1987-88
153.92
1988-89 1989-90 1990-91 1991-92 1992-93 1993-94
171.29 182.62 203.57 231.93 246.40 264.93
(2)
NTS (3)
ONT (4)
100.00 105.39 112.70 118.81 126.16
100.00
133.49
TRADED (5)
109.39 118.60 126.54 134.88 143.71
7.37 10.79 10.38 1.07 6.45
NTS (6)
5.39 6.93 5.43 6.18
ONT (7)
6-5 (8)
(9)
9.49 8.42 6.69 6.60 6.54
-1.98 -3.85 -4.96 5.12 -0.65
100.00 98.02 94.25 89.57 94.16 93.55
3.10
-2.60 -4.26
91.12 87.24
1.82 -1.40 -1.08 3.83 1.76
88.83 87.58 86.64 89.96 91.54
141.98 151.95 164.77 181.37 204.68 225.30
148.16
8.96
5.81 6.36
162.07 179.43 197.96 218.99 241.53
11.29 6.61 11.47 13.93 6.24
7.03 8.43 10.07 12.86 10.07
9.39 10.71 10.33 10.62 10.29
246.20
265.69
7.52
9.28
10.00
NTS = WPI IN NONTRADEDGOODS(INCLUDING SERVICES) eRS = REAL EXCHANGERATE (AFTER INCORPORATINGSERVICES IN NONTRADEDGOODS)
21
TABLE 2 Data For Estimating
Excess Demand
RS CRORES M-X 1982-83 1983-84 1984-85 1985-86
5490.0 6060.0 5390.0 8763.0
159395 186723 208533 233799
1986-87 1987-88 1988-89 1989-90 1990-91 1991-92
7644.0 6570.0 8003.0 7670.0 10645.0 3810.0
260030 294851 353517 405827 472660 541888
1992-93 1993-94
9687.0 -511.5
627913 706402
M-X : IMPORTS-EXPORTS Y : GDP (AT CURRENTPRICES) K : NET CAPITAL INFLOW ED : EXCESS DEMAND- (M-X-K)/Y eR
: REAL EXCHANGERATE
K
AED
837.6 2220.5 3441.9
-0.78 -0.86 -1.12 0.69
0.1767 0.6637 0.4613 0.4748
7607.7 11650.6 11611.7 12895.3 12061.3 12642.5
-0.99 -0.99 -0.68 0.06 0.50 -1.05 1.05
0.1780 0.2769 0.7155 -0.4344 -0.1330 -0.5024
4.93 -0.98 -1.12 -5.28 0.80 -1.51 -0.04
-0.2124
3.23
25120.0
-3.16
1.5426
1.38
4968.9 5989.3
x 100
K/Y
eR -3.61 -4.49 -5.51
22
TABLE 3 Inflation
In Traded and Nontraded Goods
INFLATION Year
Traded
Nontraded
Overall
1982-83
7.37
3.76
4.9
1983-84
10.79
6.29
7.5
1084-85
10.38
4.87
6.5
1985-86
1.07
6.00
4.4
1986-87
6.45
5.47
5.8
1987-88
8.96
7.84
8.2
1988-89
11.29
6.00
7.5
1989-90
6.61
7.41
7.4
1990-91
11.47
9.96
10.3
1991-92
13.93
13.89
13.7
1992-93
6.24
9.46
10.2
1993-94
7.52
8.90
8.4
23
TABLE 4 TITLE???
Year (1)
A(X-M)/Y (2)
40 (3)
(2-3) AED (4)
1980-81 -0.41 0.18 0.66 0.46
-0.31 -0.78 -0.86 -1.12
0.47 0.18 0.28 0.72 -0.43
0.69 -0.99 -0.99 -0.68 0.06
12282 13313 16952 19840 25728 27188 35967 38684 44334 54992
-1.55
-0.13 -0.50
0.50 -1.05
0.84 -1.62
-0.21 1.54
1.05 -3.16
1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91
-0.72 -0.61 -0.20 -0.66 1.16 -0.81 -0.71 0.04 -0.37 0.36
1991-92 1992-93 1993-94
PSBR (5)
Current GDP (6)
_IPSBR/GDPl (7)
122427 143216 159395 186723 208533
0.1003 0.0930 0.1064 0.1063 0.1234 0.1163
65941 65536
233799 260030 294851 353517 405827 472660 541888
0.1395 0.1209
76529 79519
627913 706402
0.1219 0.1126
PSBR = TOTAL OUTLAY-CURRENTREVENUE (OF CENTER, STATE GOVERNMENTS AND UNION TERRITORIES)
0.1383 0.1312 0.1254 0.1355
A(PSBR) (8)
-0.74 1.34 -0.01 1.71 -0.71 2.20 -0.71 -0.58 1.01 0.40 -1.86 0.09 -0.93
24
TABLE 5 Results
of Regression
of APSBN/Y On A(M-X)/Y
And A(M-X-K)/Y Sample Period = (1981-1982 to 1993-1994) Data Beginning
Denendent Variable Constant PSBR
1981-82 1982-83 1983-84 1984-85 1985-86
S S S S S
1986-87
S
1987-88 1988-89 1989-90
S S S
(M-X)/Y R-Sqr
Dependent Variable (M-X-K)/Y Constant PSBR R-Sqr
NS NS NS NS NS NS
0.52 0.55 0.60 0.58 0.46 0.67
S S S S S S
NS NS NS NS NS NS
0.37 0.36 0.39 0.45 0.41 0.40
S
0.97 0.96
NS
NS NS
0.63
S S
0.94
NS NS
NOTE: S STANDS FOR SIGNIFICANT NS STANDS FOR NOT SIGNIFICANT The best equation is for the period 1987-88 to 1993-94 A(m-X)/Y t-ratios R2 - 0.97,
=
-0.22 (-5.37)
+
0.29 APBSR/Y (4.37)
DWS- 2.9;
RHO - -0.6
NS
0.75 0.81
25
TABLE 6
.a P
.N P
.T P
.*Tb P
tC
-1.05
13.7
13.89
13.93
4.6
-12.6
-0.21
1.05
10.2
9.46
6.24
9.3
-7.6
1.54
-3.16
8.4
8.90
7.52
n.a.
n.a.
et P--P-----
(->ka
1991-92
-0.04
-21.9
-0.50
12.6-93
3.23
-4.7
1993-94
1.38
0.0
aA fall
in
increase b
This
LThis
the
nominal
exchange
in
"e"
our
has been
exports,
less is
DRY
in
estimated the
from
from
in the
.T P =e+i,
rate
index
equations
change
estimated
DED
*T
the the
in
the
change
a devaluation,
and hence
text. in
nominal
accounting
implies
the
exchange
rupee
unit
value
rate.
equation:
+t
TABLE 7 Growth
Rates
of
Industrial
Sectors
April-October
Classification Basic
Goods
Capital
Goods
Intermediate Consumer
TData
Tradable; from
Goods Goods
1992-93
1993-94
T
3.7
2.9
T
9.0
-8.8
N
4.0
10.4
N
0.0
1.4
N = Nontradable Table
6.4,
Economic
Survey
1993-1994
index
for
an
26
FIGURE 1
ET
. .
NON
TRADED
GOOD
27
NOTE TO FIG.l. PP is
the
composite
commodities
indifference
at
to
the
domestic
there
is
also
equal.
will
lead
lead
a rise in
of
by
er2.
have
to be cut,
real
exchange
in
internal
is
is in
demand
the
demand
for
of
price
and a new
expands
to meet
above
C),
and the
excess
deficit
of
With
limited
and the will
CE.
The real the
reserves,
economy depreciate
will
then back
goods
the
Y E' TT
exchange
rate
to
its
to
original
This
latter
towards
for over
will
the
it into to
an that
ultimately
In the level
an
traded
where
demand spills
will
induce
appreciates
A.
goods.
away
expenditure
move back
are
to OET.
C,
as and
= OEoT>,
will
increased
demand
excess
common
balance
the
at
of
equilibrium
which
equilibrium
good
the
goods
deficit,
two
a set
and nontraded
expenditure
(unsustainable)
the
demand
traded
a trade
of
traded
aggregate
of
external ("OT
for
the
Given
is
balance
both
of
slope
and
nontraded
switching
The
PP curve
and supply in
output
goods.
A.
in
an expansion
relative
be
at
are
the
nontraded
rate
the
running
will
trade
and
expenditure
there
output
is vertically
curve
can be met through
their
the
equivalent given
in
There
output (E
former
is
iOiO
the
(N)
equilibrium
as the
an increase
the
goods.
deficit
for
and nontraded
The economy
1'
and
Suppose to
increase
er output
no trade
Whereas to
initial
rate
frontier
CT)
indifference
exchange A
possibility
traded
curves
tangent real
production
erl.
process
the
28
FIGURE 2
NEER, REER AND eR (1981~82=100) 110 ‘100 90 80 70 60 50 1 40 1981-82
,
.-.
I
I
1983-84
I
I
198546
I
I
198748
I
I
1989-90
I
1
I
1991-92
-.-NEER +REER + eR REER: REAL EFIWXWE EXCHANGE RATE; NEER: NOMINAL EITEXXWE eR : REAL EXCHANGE RATE
.
I
1993-94
29
Table 2A. Real Exchange Rates eRS and eR 105
100 95 90 85
.
80 75
I
1982-83
I
I
1084-85
1
1
1986-87
I
I
1988-89
I
I
1990-91
I
1
I
1992-93
+eRS +eR eRS = R&U EXCHANGE RATE AFTER INCORPORATING SERVICES SEC70R IN NO: eR : REWAXCHANGERATE (EXCLUDING SERVICES)
30
FIGURE 3
VARIATION IN REAL EXCHANGE RATE OBSERVED VS PREDICTED 6
4
2
0
-2
-4
-6 1982-83
1984-85 +
1986-87 OBSERVED
+
1991-92
PREDICTED _.
1993-94
31
APPENDIX
A note
on the
data
traded
and nontraded The data
following
sources
I
and methodology
used
for
classification
of WPI into
goods
used
in
this
study
has been
primarily
obtained
from
the
sources:
Annual data on Wholesale Price Index (WPI) was obtained from the Ministry of Industry. As final data on the wholesale price Indices for the year 1993-94 was available only up to November 1993, we have: (a)
used
provisional
WPI for
(b)
derived the wholesale price indices for March (for which no data was available) inflation rate of 8.4%.
For classification and Import policy used.
of goods documents
the
months
data
commodities.
For
odd
nontraded
to
traded
traded
goods. This
not
fixed
traded
goods
market
prices
Items
which
nontraded Table Two distinct
group
goods includes
quota are
Real
WPI data
are
those
restrictions
which
canalized
or are
is
are
In
to
In
by domestic
about
as the traded
and
words
prices.
determined
subject
into
subject
other
and
Economic
for
(defined
exported are
of
available
Rate
which
international
goods
is
February an annual
goods, Export of Commerce were
issues
was classified
on them.
by
various
Indices
commodities
influenced
the months of so as to give
Exchange
the
of nontraded are
from
Price
the
goods),
Traded
margin. have
on Wholesale deriving
and January.
into traded and nontraded published by the Ministry
Data on other variables was obtained Survey and National Account Statistics. Disaggregated
of December
ratio
tariff
domestic contrast demand
of
and non-
imported
to
448
at
the
but
do
prices
of
this
the
to and
fixed
import
quotas
are
of UP1 into
traded
and nontraded
supply.
treated
goods. 1A gives time
the
classification
periods
for
which
traded/nontraded
classification
goods. is
made
as
32
are
as foll0WS:
TIME PERIOD
BASIS OF CLASSIFICATION
1982-83
to
1991-92
Export 1993,
and Import Policy published on March
(April 1990 30, 1990
to March
1992-93
to
1993-94
Export 1997,
and Import Policy published on June
(April 1992 30, 1992)
to March
As can be noted, remains
uniform
that
there
data
from
for
has
accordance
the
been
1992-93 with
This
separately) table
and the
real
classification
period
no major onwards,
the
more
The new series goods
the
of
also
change
WPI from
rates
in
to
above
inflation obtained
This
policy
policy
during
this
to
the
period.
classified
(for
methodology
them.
due
announced
1993-94
for
and nontraded is
differently
rates from
as traded
1991-92.
been
trade
the
goods
trade
1982-83
using the
to
has
liberalized
documents
exchange
1982-83
however,
obtained
of
traded
in
traded is
given
fact WPI
in 1992. and nontraded in
Table
and nontraded
2A. goods
33
TABLE 1A YEAR S. No. 1
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48
Commodity Rice Wheat Jowar Bajra Maize Barley Ragi Gram Arhar Moong Masur Urad Potatoes Sweet potatoes Onions Tapioca Ginger (Fresh) Peas green Tomatoes Cauliflower Banana Mangoes Apples Oranges Cashew nuts Coconut/fresh Papaya Grapes Milk %3s Fish Mutton Poultry chicken Pork Black pepper Chiles (Dry) Turmeric Cardamom Ginger/dry Betelnuts Cumin Garlic Tea Coffee Raw Cotton Raw Jute Mesta Raw hemp
Weight
3.685 2.248 0.420 0.178 0.191 0.053 0.049 0.410 0.274 0.201 0.054 0.154 0.472 0.068 0.156 0.128 0.082 0.137 0.117 0.131 0.468 0.964 0.379 0.274 0.115 0.534 0.020 0.044 1.961 0.263 0.507 0.521 0.375 0.117 0.042 0.319 0.051 0.055 0.038 0.151 0.214 0.077 0.564 0.125 1.335 0.160 0.050 0.011
1982-83 to 1992-93 to 1991-92 1993-94 Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Traded Non-Traded Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded
Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Traded Non-Traded Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded
Traded Traded Traded Traded Traded Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded
34
Table
1A (cont.) 1982-83
YEAR to 1992-93
S. No.
Commodity
Weight
1991-92
49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97
Raw wool Raw silk Coir fibre Groundnut seed Rape & mustard seed Cotton seed Copra Gingelly seed Linseed Castor seed Nigerseed Safflower(Kardiseed) Sunflower Soybean Mahuaseed Hidesraw Skinsraw Tanning materials Sugarcane Tobacco Rubber Lac Logs & timber Fodder Iron ore Manganese ore Bauxite Chromite Limestone Mica Fluorite Gypsum Fireclay Kasoline Dolomite Magnesite Asbestos Kyanite Rock phosphate Barytes Sulphur & pyrites Steatite Silica sand Imported petroleum crude Indigenous petroleum crude Coking coal Non-coking coal Coke Lignite
0.082 0.116 0.037
Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Non-Traded Non-Traded Traded Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Traded
1.296 0.661 1.254 0.111 0.142 0.101 0.056 0.038 0.083 0.025 0.074 0.020
0.096 0.078
0.001 2.706 0.275 0.114 0.036 0.571 0.552 0.154 0.048
0.011 0.018 0.070 0.003 0.004 0.003 0.002 0.004 0.008 0.012 0.040
0.001 0.083 0.003 0.087 0.002
0.001 3.004 1.270 0.353
0.798 0.064 0.041
to
1993-94 Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Non-Traded Non-Traded Traded Traded Traded Non-Traded Traded Traded Traded Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Non-Tradt-d Non-Tradt,ti Traded Traded Traded Traded
35
Table
1A (cont.) 1982-83
S. No. 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147
Commodity Liquified petroleum gas Petrol Kerosene Aviation turbine fuel High speed diesel oil Light diesel oil Naptha Bituman Furnace oil Lubricants Elec. for domestic purposes Elec. for power purposes Elec. for irrigation purposes Elec. for industrial purposes Elec. for special purposes Elec. for other purposes Tinned Milk Powder Butter Ghee Baby Food (All Kinds) Skimmed Milk Powder Canned Juices Jams/Jellies/marmalades Canned fish Maida Sooji (Rawa) Atta Bran (All kinds) Bread & Buns Biscuits Non-levy sugar Levy-sugar Sugar Khandsari Gur Manufacture of common salt Cocoa, Chocolate, sugar & Confectionery Hydrogenated vanaspati Gingelly oil Kardi oil Mahua oil Solvent extracted groundnut oil Rape & Mustard Oil Coconut Oil Groundnut Oil Cotton seed oil Rice bran oil Imported Edible oil Rape & mustard seed cake Groundnut cake
Weight 0.677 0.806 0.868 0.341 2.154 0.203 0.342 0.181 0.641 0.453 0.362 0.527 0.317 0.825 0.024 0.686 0.145 0.053 0.256 0.085 0.103 0.053 0.015 0.126 0.297 0.149 0.763 0.321 0.145 0.097 0.000 0.000 2.013 0.300 1.746 0.035 0.088 0.517 0.235 0.075 0.025 0.021 0.276 0.171 0.526 0.064 0.067 0.468 0.041 0.110
to
1991-92 Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded
Non-Traded Non-Traded
Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded Non-Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded
Traded Traded
YEAR 1992-93
to
1993-94 Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded Non-Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Trader! Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Tradcc! Non-Tradcc! Non-Traded Non-Tr;idI,.! Traded Traded
36
Table
1A (cont.) 1982-83
YEAR to 1992-93
S. No.
Commodity
Weight
1991-92
148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195
Cottonseed oil cake Deoiled cake Linseed oil cake Coconut oil cake Gingelly oil cake Caster oil cake Packed tea Instant coffee Cattle feed Poultry feed Maize starch Glucose & dextrose Malted food Rectified spirit Indian made foreign spirit Malt liquor Soft drink & carbonated water Bidi Cigarettes Zerda Hanks Cones Longcloth/sheeting Poplin/shirting Coating/Drill Dhoties, sareas & voils Miscellaneous Cotton cloth (Powerloom) Cotton cloth (Handloom) Khadi cloth Viscose staple fiber Polyester staple fiber Viscose filament yarn Filament yarn synthetic Blended mixed cloth Art silk cloth Woollen yarn Woollen cloth Suiting cloth Woollen hosiery Hessain cloth Hessain & sacking bags D.W. tarpaulin Cotton Hosiery Shirts/bushshirts Coiryarn Coirmats & mattings Plywood commercial planks
0.135 0.079 0.003 0.034 0.024 0.006 0.127 0.109 0.061 0.042 0.034 0.050 0.053 0.034 0.065 0.059 0.066 1.086 0.556 0.283 0.616 0.616 0.360 1.127 0.295 1.188 0.189 0.906 0.740 0.056 0.163 0.239 0.314 0.574 1.573 0.058 0.140 0.045 0.076 0.078 0.200 0.456 0.033 1.186 0.174 0.097 0.046 0.188
Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Non-Traded Traded Traded Traded Non-Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded
to
1993-94 Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded
Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Non-Traded Traded Traded
Traded Non-Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded
Traded Traded Traded Traded Traded Traded Traded Traded Traded
37
Table
1A (cont.) 1982-83 1991-92
YEAR to 1992-93 to 1993-94
S. No.
Commodity
Weight
196
Resawan 6 hewan timber planks railways sleepers & others Pulp Printing paper white Map, litho paper M.G. paper poster Kraft paper Newsprint Duplex board Straw & mill board Other boards (All kinds) Printing & publishing of newspaper, periodicals, etc. Sheep & goat skin Sole leather Footwear Western type Giant tires Motor tires cycle tires Tractor tires Giant tubes Cycle tubes PVC pipes & tubing Decorative laminates Rubber & canvas footwear Camelback Hoses Tooth brushes Rubber belting Sodiumhydroxide (Caustic soda) Sodium carbonate (Soda ash) Oxygen Calicum carbide Sodium phosphate Nitric acid Titanium dioxide Sulfuric acid Liquid chlorine Benzene Low density polyethylene Acrylic fiber Formaldehyde Acetylene Ammonium sulphate N-content Urea N-content Complex fertilizers N-content Di-ammonium phosphate N-content Superphosphate P205 content Ammonium phosphate P205 content
1.010
Non-Traded
Non-Traded
0.090
Traded Traded Traded Traded Traded Non-Traded Traded Traded Traded Non-Traded
Traded Traded Traded Traded Traded Non-Traded Traded Traded Traded
Traded Traded Non-Traded Traded Non-Traded Non-Traded Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded
Traded Traded Non-Traded Traded Non-Traded Non-Traded Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Non-Traded Non-Traded Traded
197 198 199
200 201 202 203 204 205 206 207 208 209
210 211 212 213 214 215 216 217 218 219
220 221 222 223 224 225 226 227 228 229
230 231 232 233 234 235 236 237 238 239
240 241 242
0.226 0.059
0.036 0.143 0.137 0.115 0.125 0.200 0.740 0.388 0.277 0.353 0.499
0.085 0.053 0.060 0.031 0.038 0.315 0.127 0.108 0.039 0.097
0.002 0.138 0.300 0.149 0.051 0.047
0.046 0.025 0.027 0.075 0.044 0.066 0.240 0.086 0.032 0.028 0.040 0.992
0.138 0.052 0.064 0.115
Non-Traded
Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded
38
Table
1A (cont.) 1982-83 1991-92
YEAR to 1992-93 to 1993-94
S. No.
Commodity
Weight
243 244 245 246 247 248 249 250 251 252 253 254 255 256 257
Complex fertilizers NPKcontent Calicum ammonium nitrate N-content Pesticides Paints (Except alum paints) Enamels Varnishes Vat dyes (Indigo solubilized & others) Reactive dyes Organic pigments Optical whitening agents Vitamin tablets (A,B,C,D 6 Others) Vitamin capsules Vitamin liquids Chloramphenicol Penicillin (Vials,tablets & other products) Streptomycin (Vials & other products) Tetracycline (In capsules, vials & others) Powder/granular other than vitamin Liquid oral other than vitamin Liquid Injectable other than vitamin Capsule other than vitamin & antibiotics Tablet except vitamin & penicillin Ointments Syrup Drugs & pharmaceuticals n.e.c. Ayurvedic medicines liquid Household laundry soap Toilet soap Synthetic detergents Agarbatti Tooth paste Tooth powder Powder talc/face Hair oils Glycerine Resins Cream snow Synthetic resins Synthetic rubber Polyethylene molding powder Rubber chemicals P.V.C. resins P.V.C. sheets Caprolactum Polystyrene Safety Matches Blasting powder
0.322 0.025 0.202 0.106 0.113 0.021 0.160 0.077 0.078 0.021 0.061 0.030 0.043 0.028 0.047
Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Non-Traded
Traded Non-Traded
0.034 0.068
Non-Traded Non-Traded
Non-Traded Non-Traded
0.027 0.116 0.084 0.047 0.300 0.063 0.030 0.054 0.033
Traded Traded Traded Traded Traded Non-Traded Non-Traded Non-Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded
Traded Traded Traded Traded Non-Traded Non-Traded Non-Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded Traded Non-Traded Non-Traded
258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289
0.594
0.121 0.165 0.134 0.070 0.025 0.016 0.038 0.027 0.014 0.011
0.065 0.066 0.105 0.048 0.070 0.019
0.082 0.022 0.233 0.054
Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded Non-Traded Traded Traded
Traded
39
Table
1A (cont.1
S. No.
Commoditv
Weight
290 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318
Cine color positive Printing ink Carbon black Fatty acids Fire works Napthols Castor oil Essential oils Linseed oil Flavoring essence Firebricks Basic refractories Building bricks Ceramic tiles Non-ceramic tiles Bottles Sheet glass High tension insulators Tumblers Bangles Crockery Sanitary ware Cement Lime Mica products Asbestos cement corrugated sheets Asbestos cement pressure pipes Ports 6 poles Grinding wheels Coated abrasive Electrodes Hume pipes Basic pig iron Foundry pig iron Other pig iron Steel ingots (plain carbon) Blooms Billets & slabs Skelps Oro mild steel tensile plate Angles, channels & sections Joist & rolls Bars & rods Defective cutting Scrap (all kinds) Carbon tools & high speed steel Stainless steel Malleable castings Ordinary castings
0.044 0.040 0.083 0.076 0.030 0.024
319
320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338
0.119
0.020 0.117 0.016 0.091
0.067 0.454 0.037 0.046 0.069
0.040 0.041 0.034 0.023 0.017 0.072 0.860 0.056 0.041 0.089 0.069
0.028 0.045 0.015 0.261 0.022 0.023 0.031 0.033 0.330 0.090
0.277 0.040 0.126 0.218 0.035 0.955
0.023 0.084 0.063 0.113 0.084 0.307
1982-83 1991-92
YEAR to 1992-93 to 1993-94
Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded
Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Traded
Traded Traded Non-Traded Non-Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded
Traded Traded Traded Non-Traded Non-Tr;idt,d
40
Table
1A (cont.)
S. No.
Commoditv
Weight
339 340 341 342 343 344 345 346 347 348 349 350 351 352 353 354 355 356 357 358 359 360 361 362 363 364 365 366 367 368 369 370 371 372 373 374 375 376 377 378 379 380 381 382 383 384 385 386 387
Non-ferrous castings (all kinds) Stamping & forgings Heavy Light structurals Heavy rails (23 Kgs. upwards) Tin plates Sheets Bright bars Axles, wheels 6 tires Pipes & tubes Spun pipes Steel wire Wire Ferro manganese Ferro silicon Alloy steel, stainless steel Aluminum ingots Aluminum Sheets & Strips Aluminum bars & rods Aluminum foils Aluminum rolled products Copper brass & rods Brass sheets 6 strips Tin Lead Nickel Zinc Calcined alumina Barrels Drums Tin boxes/containers Bolts & nuts Utensils Hurricane lanterns Steel files Twist drills Spanners Locks Steel furniture Razor blades Collapsible tubes Tractors Dumpers its parts & accessories Boilers, Internal combustion engines Diesel engines (stationary types) Road rollers Mining machinery Machinery for cotton & synthetic Ring spinning 6 doubling frames
0.025 0.225 0.215 0.057 0.058 0.301 0.032 0.029 0.569 0.077 0.073 0.095 0.049 0.045 0.102 0.206 0.034 0.078 0.064 0.072 0.181 0.050 0.060 0.053 0.032 0.097 0.098 0.081 0.062 0.420 0.293 0.552 0.009 0.025 0.024 0.026 0.029 0.252 0.020 0.030 0.343 0.027 0.387 0.214 0.325 0.018 0.079 0.134 0.335
1982-83 1991-92
YEAR 1992-93 to 1993-94
to
Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded
Non-Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded
Traded Non-Traded Non-Traded Traded Non-Traded Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded
Non-Traded Non-Traded Non-Traded Non-Traded
Non-Traded Non-Traded
Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Non-Traded Non-Traded Non-TradtJJ Non-TradtAd Non-Tradc.c! Non-Tradt,c! Traded Traded Traded Non-Traded Traded Traded Traded
41
Table
1A (cont.)
S. No.
Commoditv
Weight
1982-83 t0 1991-92
388 389 390 391 392 393 394 395 396 397 398 399 400 401 402 403 404 405 406 407 408 409 410 411 412 413 414 415 416 417 418 419 420 421 422 423 424 425 426 427 428 429 430 431 432 433 434 435 436
Powerlooms (automatic & others) Tea machinery Refrigerators (domestic) Power driven pumps Air & gas compressors Ball bearings lathes Typewriters Computing machines Sewing machines Air Conditioners Components & accessories of generators Transformers Switch gears Components & accessories of switch gears Electric motors phase one HP Electric motors phase three HP Starters Alternators Electric motor contractors Enamelled copper wires P.V.C. insulated cables Paper insulated cables Drycore cables Wires Rubber insulated 6 other cables Batteries Dry cell Table fans Ceiling fans Glass lamps Fluorescent tubes Transistor sets T.V. sets AC Electronic automatic indicators Broad gauge diesel locomotives Broad gauge passenger carriages Broad gauge open wagons Truck chassis (diesel) Car chassis assembled Bus chassis (diesel) Body manufactured for buses Body manufactured for trucks, vans etc Diesel fuel pumps Gears (All kinds) Jeeps Three wheelers Motorcycles Scooters
0.206 0.038 0.105 0.208 0.130 0.362 0.208 0.038 0.033 0.053 0.034 0.098 0.267 0.158 0.172 0.114 0.157 0.087 0.052 0.042 0.102 0.359 0.095 0.042 0.057 0.073 0.067 0.164 0.063 0.170 0.139 0.052 0.165 0.157 0.139 0.124 0.088 0.062 0.683 0.214 0.228 0.076 0.060 0.039 0.050 0.101 0.039 0.094 0.105
Non-Traded Traded Non-Traded Traded Non-Traded Traded Traded Non-Traded Non-Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded
YEAR 1992-93
t0
1993-94 Traded Traded Non-Traded Traded Non-Traded Traded Traded Non-Traded Non-Traded Traded Non-Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Traded Traded Non-Traded Non-Traded Non-Traded Non-Traded
42
Table
1A (cont.)
YEAR
S. No.
Commodity
WeiEht
437 438 439 440 441 442 443 444 445 446 447 448
Bicycles Shock absorbers Radiators Pistons Trailers Gaskets Springs Other automobile spare Wristwatch Gramophone records Fountain pen House service meter
0.132 0.010 0.021 0.017 0.022 0.016 0.062 0.462 0.352 0.189 0.409 0.022
parts
1982-83 1991-92 Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded
to 1992-93 to 1993-94 Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded Non-Traded
43
TABLE 2A Annual Data on Inflation
Rates for Traded and Nontraded Goods
And Real Exchange Rate WPI Year
INFLATION
Traded (1)
Nontraded
1981-82 1982-83 1983-84 1984-85
100.00 107.37 118.95 131.30
100.00 103.76 110.29 115.66
7.37 10.79 10.38
3.76 6.29 4.87
-3.61 -4.49 -5.51
100.00 96.39 91.90 86.38
1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92
132.70 141.26 153.92 171.29 182.62 203.57
122.60 129.31 139.45 147.82 158.78 174.59
1.07 6.45 8.96 11.29 6.61 11.47
6.00 5.47 7.84 6.00 7.41 9.96
4.93 -0.98 -1.12 -5.28 0.80 -1.51
91.32 90.34 89.22 83.94 84.74 83.22
231.93 246.40 264.93
198.84 217.66
13.93 6.24
13.89 9.46
-0.04 3.23
83.18 86.41
237.03
7.52
8.90
1.38
87.79
1992-93 1993-94
(2)
Traded (3)
Nontraded (4)
Real Exchange Rate (eR) % Change INDEX (4)-(3) 1981-82=100 (5) (6)
44
For exchange these
the
year
rates
were
1993-94, worked
wholesale out
price
indices,
on a monthly
basis
inflation as well.
rates Table
and
3A gives
results. TABLE 3A Monthly
Data
on Inflation
Rates
And Real
Year (1)
Month (2)
For
Traded
Exchange
and Nontraded
Goods
Rate
TRADED
NONTRADED
WPI % Chance (3) (4)
WPI % Change (5) (6)
Real Exchange Rate (eR) (6)-(4) % Change (7)
1993
JANUARY
249.88
-
220.33
1993
FEBRUARY
253.29
1.36
220.23
-0.04
-1.40
1993
MARCH
252.60
-0.27
221.00
0.35
0.62
1993
APRIL
253.89
0.51
222.65
0.75
0.24
1993
MAY
256.00
0.83
225.04
1.07
0.24
1993
JUNE
256.87
0.34
228.72
1.63
1.29
1993
JULY
261.80
1.92
231.81
1.35
-0.57
1993
AUGUST
265.46
1.40
236.01
1.81
0.41
1993
SEPTEMBER
266.80
0.50
240.70
1.99
1.49
1993
OCTOBER
267.99
0.45
242.86
0.90
0.45
1993
NOVEMBER
268.45
0.17
241.89
-0.40
-0.57
1993
DECEMBER*
267.67
-0.29
240.44
-0.60
-0.31
1994
JANUARY*
267.40
-0.10
241.12
0.29
0.39
NOTE:
Results for the based provisional
months data.
of
December
1993
and January
1994
real
are
45
APPENDIX II
The program used for obtaining nontraded c *** C
10
50
70 C C C C 20
100 71 30
and
goods is given below: PROGRAMTO COMPUTEWEIGHTEDPRICE INDEX OF TRADED AND NONTRADEDGOODS IMPLICIT DOUBLEPRECISION (A-H,O-Z) CHARACTER*12FNAME WRITE (*,lO) FORMAT(lX,'PLEASE ENTER THE NAME OF THE DATA FILE: '\) READ(*,50) FNAME FORMAT(A) OPEN(5,FILE-FNAME) OPEN(6,FILE='OUTP',STATUS-'NEW') SUMWT= 0.0 SUMWNT= 0.0 TRADP = 0.0 TRADNP- 0.0 READ(5,20,END=1OO)IYEAR,ICOM,COMWT,PINDX IYEAR IS THE YEAR CODE ICOM IS COMMODITYCODE (l-TRADED, 2=NONTRADED) COMWTIS THE WEIGHT OF THE RESPECTIVE COMMOFITYIN OVERALLWPI PINDX IS THE WHOLESALEPRICE INDEX FORMAT(I5,12,2FlO.O) IF(ICOM.EQ.l) THEN Y- COMWT*PINDX TRADP =Y + TRADP SUMWT= SUMWT+ COMWT ENDIF IF(ICOM. EQ.2) THEN Z- COMWT*PINDX TRADNP- Z + TRADNP SUMWNT- SUMWNT+ COMWT ENDIF GO TO 70 WPIT = TRADP/SUMWT WPINT - TRADNP/SUMWNT WRITE(6,71)SUMWT,SUMWNT FORMAT(lX,3F15.4) WRITE(6,3O)IYEAR,WPIT FORMAT(2X,'YEAR =', 17,5X,'WEIGHTED WPI FOR TRADED GOODS=' #,F10.2,//)
40
the weighted WPI for traded
WRITE(6,4O)IYEAR,WPINT FORMAT(2X,'YEAR =', 17,5X,'WEIGHTED WPI FOR NONTRADEDGOODS=' #,F10.2;//) . CLOSE(5) CLOSE(6) END
46
APPENDIX AN ALGEBRAIC
We can Figure,
to for
(P,>, foreign
formalize obtain
the the
any
given
(Nd)
Nd - a
small
of terms
macroeconomic the
money
of
trade
(N')
for
MODEL
model
price
of
(given
depicted
nontraded
Pf)
and
in
market
addition
the
level
supply
al(PN-PT)
d
the
nontraded
+ a2Y + a3Bo + a4(M
s
goods
is
d -M )
prices,
(nominal)
w
and
of
payments,
are
the
money
demand and
given
by:
0
Y
notation wage
for
money
supply
- al(PTd-PN)
rate,
is
MS
the
the
domestic supply
of
goods,
and
output money
(nominal).
(T')
for
+ (1-a2)Y
traded
+ (1-a3)Bo
the
+(l-a4)(MS-Md)
(A.6)
at
demand
is
(A.4)
B. = Td - TS market
function
(Md/N.Pd) N
balance
(A.5)
prices
is
given
by:
Y = Td - TS
where
at
TS = co + cl(PTd-PN)
output
The money
by
(A.2)
previous
(Td)
Td - a
Domestic
our
the
The demand
given
(A. 3)
is
Md
of
(A.1)
+ bl(PN-w)
to
the
goods
Nd = NS where
by
as follows. and
0 -
NS = b.
economy
determinants
(Bo),
The demand
VERSION OF THE AUSTRALIAN
external
borrowing
3
the
(A.7) is
given
by:
= k(Y/N)a
population.
(A. 8)
The money
supply
process
is
determined
from
47
the
following
accounting
and
a behavioral
relationship
import
of
the
consolidated
banking
system,
function
AM' = ANFA + D
where
the
ANFA = X - I + B.
(A.lO)
I-
(A.ll)
ANFA
system, value
do + dl
is
D
(A.9)
the
the of
b cyp,)
change
change
in net
in
exports,
total
foreign domestic
assumed
assets
of
credit
to be given
the
of
the
consolidated banking
exogenously,
system, I
and
banking
the
X
level
of
imports. From and
(A.l)
(A.7),
to
(A.3),
and substituting
and rearranging
yields
y
in
an expression
(A.l)
for
the
from
(A.2),
(A.5)
determinants
of
Pn
as (A.12)
PN = constant
We can use nontraded (Bo), goods
+
bl(l-a2) -a2clw al+bl(l-a2)
+
a3 al+bl(l-a2)
this
good
and compare price
constant
rose w
required
with
by more d P T'
and
change
(PN) that
in
for
(P:)
judge
and
to what
the
equilibrium
deviated
form
the
observed
actual
(P,)
that
the
(MS-Md)
estimate
f or the
than
or tradables weather
to
and with
PN
a1+a2c1 al+bl(l-a2)P:
a4 Bo + al+bl(l-a2)
expression
price
+
change to
observed
and any excessive the rate
for
Next, changes
monetary current erl
in
in
change
nontraded (with
we can estimate money
expansion
the
the
the
borrowing
equilibrium
in
real
in
foreign
see whether
was required MS = Md).
extent
required
exchange Figure.
wages
the (w),
(MS > Md), rate
a
in
price to
India
48
In the
the
extent
second of
consider
monetary
expansion
of First
exercises
monetary
the
for
and exports
balance
above
the
we ask
observed
payments,
that
is
note
from
(A.8),
that
will
form
changes
for
be necessary
the
What would
is:
there
also
(MS > Md).
derivations
so that
(X),
it
expansion
following
The question
(A.8)-(A.11).
(Bo)
the
any excessive
empirically, in
of
in
the
To do this monetary
have
level
was equilibrium
to judge
submodel
been of
in
the
required
capital
the
inflows
overall
ANFA - O? we can derive
the
standard
quantity
theory
relationship YPd
where
v,
the
= v
. M
income
A.8a)
velocity
of money
is
given
by
v = l/(k.ya-') with
y = Y/N, Next,
per
from
(A.8b)
capita
(A.lO)
income.
with
ANFA - 0,
we have
X+Bo-I-O
substituting (A.9)
for
yield
credit inflow
I
after
(D)req,
for
Comparing
estimated
from
an
the the
pN
for
(YP,) the
change
leads
to
Bo>/v
l
from
required in
ANFA = 0,
(X+
expansion
observed
changes
in
provide
our
will
derive = [a3/al+bl
in
a relationship +
(l-a2)ldB
and
in
for
M
form
domestic
foreign
capital
) I/d1
credit
from
the
exports
and
foreign
estimate from
and
as
dl[(X+BoWy
actual
(A.8a), expansion
exports
a-l =
(A.13)
We can also
(A.ll),
exogenous
which
Dreq
for
from
some manipulation,
(X+Bo),
stability
(Al0.a)
(A.12)
of
(A.13)
required
(MS-Md) between
for
capital in PN
monetary inflows
(A.12). and
dB, (A.12a)
as
49
Denoting n
S
the
elasticity
respectively,
we have
al = Making
use
dividing Y,
the
of
Nd
(A.3),
l
nd;
after
numerator
demand from bl
and supply
(A.l) =
NS
and l
substituting
and denominator
of
(A.2)
nontraded
goods
by
nd
and
that
ns
for of
al the
and
RHS of
b
1
(A.12a)
as above, by real
and output
yields pN
where
of
= [(a3aY/N)/(nd+ns(l-a2))]dB/Y
N = Nd = NS
and
dW = dPTd = d(MS-Md)
= 0
(A.12b)
