Volume 7, Issue 2

Studies of the effects of foreign direct investment (FDI) in the developing countries have reported many conflicting results. In this study, we test the effects of inward FDI on China's domestic capital formation, exports, imports, and GDP growth. To that end, we estimated four econometric equations using a data set covering the 1980-1999 period. A key finding of our research is that it was in the 1990s that inward FDI began to exert a significant effect in the Chinese economy. Our regression results show that the inflow of FDI has stimulated domestic investment in China. The growing presence of FDI appears to have enhanced the investment efficiency in the Chinese economy. Inward FDI is also found to have significantly increased China's exports and imports. The policy implications of our main findings are discussed. Several methodological issues pertaining to FDI research in China are also discussed.

The forces shaping the revolution in banking and capital markets have radically changed the financial landscape during the past three decades. A remarkable feature of this changing new landscape has been the astonishing rate of internationalisation of the financial system in the last two decades, with emerging markets becoming increasingly important participants.At times this participation has led to excessive reliance on foreign financing, making the participation of these countries in the global financial system more vulnerable to shifts in expectations and perceptions. The sovereign debt management strategy suffered from many structural weaknesses, failing to take into account international best practices in financing budget deficits and developing domestic government securities markets. Consequently, emerging markets experienced episodes of serious financial crises.Against this background, this article focuses on new and more sophisticated strategies to develop domestic bond markets, taking into account the risk profile, complexities and other constraints of emerging markets. The article's central thesis is that risk-based public debt management and liquid domestic bond markets are important mutually reinforcing strategies for emerging financial markets to attain (1) enhanced financial stability, and (2) a more successful participation in the global financial landscape. It will also be shown that this twin-strategies approach requires taking a macroeconomic policy perspective.

The present study gives an account of IT and ICT infrastructure in India and points out the reasons for the boom in the IT exports and outsourcing business today and in times to come. The article analyzes the performances of the Indian IT industry by working out the technical efficiency of the software and telecommunication firms using the mathematical model of the Data Envelopment Analysis (DEA). The DEA is a non linear programming way of calculating technical efficiency of the decision making units. The study also examines the impact of various determinants on technical efficiency of software firms and net exports across the IT firms and further examines the determinants for new technology adoption by telecommunication industries, because the success of the software firms in terms of its exports is intertwined with the performance of telecommunication industry. The study uses a Malmquist index to estimate total factor productivity (TFP) change for the common set of software firms existing between 1996 and 2006 using a prowess data base. The total factor productivity is decomposed into efficiency change (catching up phenomena) and technical change (innovations) for the common set of software firms existing between 1996 and 2006 in India. At the end the study works out the performance of the Indian ICT sector in comparison with countries which are front runners using the DEA and global information technology report 2006 data base. The study will quantify the changes needed in the relatively good Indian ICT environment and ICT readiness to increase its ICT usage among individuals, business and government. The article confirms the improvements in productivity, efficiency, and technical change of the Indian Software industry from 1996 to 2006.

This study evaluates structural changes over time in the cross-country relationship between growth and volatility. Using a GMM 2SLS method to control for endogenous variables, and a time-series based rolling window estimation procedure, this study adds to the current literature in two significant ways. The first is that to assume the cross-country growth/volatility correlation is constant over time, or differs across ad hoc predetermined intervals of time is inappropriate. Instead, the early to mid 1990's seems to be the primary area whereby there are significant changes in the relationship across countries. Specifically, volatility negatively impacted growth for developed nations around this time, while it positively impacted growth for developing nations--the latter happening a few years later than the former. The second finding is that the positive impact that trade had on the growth/volatility relationship for developing countries during this period is outweighed by the negative impact of gross capital flows. Among developed nations, globalization reduces a negative effect that gross capital flows has on the relationship. For policy and constituency appeasement purposes the former is an argument for caution when entering into the global economy, and the latter an argument to embrace it.

This article deals with the philosophy of Globalization, as well as Indian economic policy and response in pursuing reforms.