Interest rates in open economies : real interest rate parity, exchange rates, and country risk in industrial and developing countries

The paper tests for the relative importance of international capital market integration in determining interest rates in a broad sample of both industrial and developing countries. The recent turbulence in industrial country financial markets has underscored these concerns. One view holds that it is possible for countries to conduct an independent domestic interest rate policy. The other suggests that there is very little room for managing interest rates in open economies without destabilizing effects on exchange rates - given the massive volumes of capital market transactions that force interest rate parity across countries. Interest rate formation in developing countries has attracted much less attention. But it is an increasingly important issue as a growing number of them undertake financial liberalization. The central question for policy-makers is again the degree to which domestic interest rates are influenced by world interest rates. A separate concern is high domestic interest rates, relative to world interest rates, in some developing countries. A model of real interest rate parity is proposed as the main test for capital market integration - that is, that nominal interest rate differences across countries are largely explained by inflation differentials (rather than uncovered or covered nominal interest parity). The evidence suggests strongly that although domestic monetary policies play a significant role, real interest parity is a dominant factor, in both industrial and developing countries. However, expectations of exchange rate changes also significantly influence interest rates. A third key factor is the apparent presence of significant"country risk", unexplained by macroeconomic imbalances, for some developing countries (for example, Chile, Indonesia, Mexico, and the Philippines) pushing real domestic interest rates higher than what would be otherwise predicted. The concluding section discusses the possible reasons for such"country-risk"in the case of Indonesia.Banks&Banking Reform,Economic Theory&Research,Macroeconomic Management,Environmental Economics&Policies,Insurance&Risk Mitigation

On Chern-Simons corrections to magnetohydrodynamics equations

We study the effect of a (3+1)-dimensional Chern-Simons electrodynamics on the equations governing the dynamics of magnetized plasma and fields. In this model, the Chern-Simons (CS) part consists of a dynamical pseudo-scalar field whose space-time derivatives couple with the electromagnetic field. We explore the CS corrections to the evolution equation for the magnetic field in a plasma with non-zero electrical resistivity. We revisit Cowling's theorem in this context and observe that the CS corrections lead to possibly small but non-zero source terms for axisymmetric magnetic field. The scalar product of electric and magnetic fields play the role of source of the pseudo-scalar field, and therefore, pulsars and magnetars are likely astrophysical candidates to generate propagating pseudo-scalar waves. Although aligned electric field gets shorted out by flowing charges in large parts of the magnetosphere, there are vacuum gaps in the vicinity of pulsars where strong $\vec E. \vec B$ is expected to be present. We derive a wave solution for the pseudo-scalar field generated by the time-varying $\vec E. \vec B$ associated with a pulsar.Comment: 11 pages, to appear in Plasma Science and Technology (2010

Specific heat at constant volume in the thermodynamic model

A thermodynamic model for multifragmentation which is frequently used appears to give very different values for specific heat at constant volume depending upon whether canonical or grand canonical ensemble is used. The cause for this discrepancy is analysed.Comment: Revtex, 7 pages including 4 figure

Public health in India : an overview

Public health services, which reduce a population's exposure to disease through such measures as sanitation and vector control, are an essential part of a country's development infrastructure. In the industrial world and East Asia, systematic public health efforts raised labor productivity and life expectancies well before modern curative technologies became widely available, and helped set the stage for rapid economic growth and poverty reduction. The enormous business and other costs of the breakdown of these services are illustrated by the current global epidemic of avian flu, emanating from poor poultry-keeping practices in a few Chinese villages. For various reasons, mostly of political economy, public funds for health services in India have been focused largely on medical services, and public health services have been neglected. This is reflected in a virtual absence of modern public health regulations and of systematic planning and delivery of public health services. Various organizational issues also militate against the rational deployment of personnel and funds for disease control. There is strong capacity for dealing with outbreaks when they occur, but not to prevent them from occurring. Impressive capacity also exists for conducting intensive campaigns, but not for sustaining these gains on a continuing basis after the campaign. This is illustrated by the near eradication of malaria through highly organized efforts in the 1950s, and its resurgence when attention shifted to other priorities such as family planning. This paper reviews the fundamental obstacles to effective disease control in India and indicates new policy thrusts that can help overcome these obstacles.Health Monitoring&Evaluation,Health Economics&Finance,Brown Issues and Health,Public Sector Management and Reform,Rural Development Knowledge&Information Systems