PERS 2013

Permanent URI for this collectionhttps://ir.lib.pdn.ac.lk/handle/20.500.14444/195

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Simulating socio-economic impacts of climate change on rice farming systems: trialing a novel integrated methodology for Kadawaramulla, Kurunegala
(University of Peradeniya, Sri Lanka, 2013) Herath, D. I.; A. S. M. P. M. B. Agalawatte; A. E. N. De Alwis; Y. G. Harischandra; S. S. K. Chandrasekara; Z. Yahiya; L. Zubair; P. A. Samaratunga
Introduction: More than 33% of Sri Lanka’s population is directly or indirectly engaged in the rice sector (CBSL, 2011). Rice is produced in the Maha season (October to March) and the Yala season (April to September). Rice farms are generally small and crops are grown in complex, diverse and risk- prone environments. Climate change could have an impact on physicaland biological systems (Rosenzweig et al., 2008) and rice productivity in South Asia is predicted to be reduced by 14% by 2050 (IFPRI. 2009). The objective of this study is to assess a methodological approach to quantify the socio-economic impacts of climate change on rice dominated farming systems going beyond estimating net aggregate benefits and losses. Given the shortcomings of contemporary models, an integrated multi-model approach is called for. Here, we present a case of using one climate model, one crop model and one socio-economic model (all of which are state of the art) – to demonstrate the feasibility of using such models in an integrated framework under Sri Lankan conditions more substantially. We restrict ourselves to quantifying the potential number of farms that could gain or lose under a specific future climate change scenario without adaptation.
Impact of microcredit on women empowerment: evidence from thrift and credit co-operative societies of Anamaduwa divisional secretariate divisions in Sri Lanka
(University of Peradeniya, Sri Lanka, 2013) Jayasinghe, J. M. M. M.; Herath, H. M. W. A.
Introduction: Microcredit can be defined simply as a method of supplying working capital to small scale entrepreneurs. Microcredit and credit-plus services such as consultancy; skill and business development trainings; and market assistance are increasingly used as grass-root instruments for alleviating poverty and improving the poors’ access to financial services in developing countries. The micro-loan is intended particularly for poor women to allow them to collect the required capital needed to start or improve a small business. Women’s empowerment refers to women’s capacity to increase self-reliance, their right to determine choices, and their ability to influence the direction of change by gaining control over material and nonmaterial resources. Empowerment helps to improve the socioeconomic status, political participation and social networks and overall developments of women. It also contributes to the economic productivity and social well-being of poor women and among their household members. The exisiting empirical and theoretical literature reveal that the evolution of thinking on microcredit and women reflects an acknowledgement of the failure of the formal credit market to reach poor women (Sharma, 2011). Colombage et al. (2008) have claimed that Micro Finance (MF) has positive impacts on client’s socio-economic development at various levels such as at family, business, community and individual. Gunathilake and de Silva (2010) have found that owing the loan increases woman’s control over the loan-assisted project which has a significant and positive impact on her level of empowerment. However, de Mel et al. (2008) has showed that men have the positive impact of microcredit on their income than women borrowers. The above findings diverse the discourse on impact of microcredit on women empowerment.
A deconstruction of the Sri Lankan government’s post-war economic and human development model and it’s ideology
(University of Peradeniya, Sri Lanka, 2013) Rajapaksha, Kalpa; Liyanage, Sumanasiri
Introduction: The post-war Sri Lankan context marks a crucial phase in the political economic history of the country (Liyanage, 2011 and IPS, 2010). The comprehensive military defeat of Liberation Tigers of Tamil Eelam (LTTE) in May 2009, signified a fundamental change in the balance of political power in both North and South of Sri Lanka. This change, increased the political power through strengthening the parliamentary seats and the emotional support of the majority of the population. It has resultedin been able to accumulate a new breed of multidimensional legitimization to the war- triumphed Sri Lankan Government during the post- war period of 2009 – 2012. The government has focused its attention on a major development exercise for the North including ‘Northern Spring’ (UthuruWasanthaya / Wadakkil Wasantham) based on the government’s centralized planning, financing and supervising architecture reflecting the ‘Mahinda Chinthana’ (Thoughts of Mahinda) development programmes. The above development architecture has been targeted to address immediate and long-term economic and humanitarian needs of war affected civilians in the North with a collective approach. The basic research question of this study is whether Rajapaksha-regime development programmes could address the politico- economic and human development issues of the war affected civilians in Northern Sri Lanka.
Economic regulation in the milk powder market of Sri Lanka
(University of Peradeniya, Sri Lanka, 2013) Premachandra, Nadeeka; Kankanamge, Anuruddha
Introduction: Milk powder is an essential good in the commodity basket of an average Sri Lankan household. The Sri Lankan government regulates milk powder market by imposing a maximum retail price and also by taxing the milk powder importers. The objective of these regulations in general is to ensure economic benefits of the milk powder consumers as well as to local milk powder manufacturers. The government tax imposed on the milk powder importers may protect domestic producers while earning some revenue to the government and the maximum retail price is cited as a policy to protect consumers. In this study, we examine these two policies i.e whether the tax on importers gives any protection to the local milk powder producers and whether the consumers are benefited by the imposed maximum retail price. Specifically, we attempted to examine that whether the government should impose the maximum retail price policy as well as tax on imported milk powder. Some recent studies by Bogahawatta and Herath (2006), Karunagoda et al. (2007), Weerahewa and Rajmohan (2008) have investigated different aspects of the milk powder market in Sri Lanka. However, requirement of regulating milk powder market using tax and maximum retail price has not been investigated in the literature and this study focuses on that issue.
An empirical study of the fisher effect and price puzzle in Sri Lanka
(University of Peradeniya, Sri Lanka, 2013) Edirisinghe, Navoda; Sivarajasingham, Selliah; Nigel, John
Introduction: Maintaining price stability is one of the primary objectives of monetary policy in any economy. Because, price instability particularly high inflation, will cause economic growth to reduce, by reducing investments and productivity. Since, interest rates are one of the main channels that monetary policy uses to achieve the above goal, it is important to understand the relationship between interest rates, inflation and expected inflation. The “Fisher Hypothesis” and “Price Puzzle” provide the theoretical basis for these relationships. Fisher (1930) postulates that there is a one-to-one relationship between the nominal interest rate and expected inflation and assumes a constant real interest rate over the long-run. The Fisher hypothesis continued to generate a series of debates among economists. In the Fisher hypothesis the real interest rate is basically determined by real factors of the economy. This implies that the monetary policy measures are less effective to influence the real interest rate. On the other hand, Price puzzle simply states the positive relationship between nominal interest rate and inflation. According to the conventional view of monetary policy transmission mechanism there should be a negative association between nominal interest rates and inflation.This dynamic relationship between nominal interest rate and inflation will enable policy makers to conceive the nature, extent and dynamics of effective monetary policy. Cooray (2002) identified some evidence for Fisher relationship in Sri Lanka. The final conclusion of that study is, the market is likely make systematic mistakes in predicting the actual rate of inflation. Moreover, Jayasinghe and Udayaseelan (2008) have done an empirical study about the Fisher Effect in Sri Lanka. According to that study, monthly and quarterly data clearly display the absence of a long-term Fisher relationship in financial markets of Sri Lanka and annual data during the period 1953-1977 provide some evidence for such a relationship. Furthermore, Javid and Munir (2011) have done an empirical study to address the issue of monetary policy effectiveness and the price puzzle in Pakistan economy. The main findings of this study suggest that a positive interest rate shock (contractionary monetary policy) leads to persistent rise in the price level over a 48-month horizon.
The relationship between money supply and interest rates: an empirical investigation in Sri Lanka
(University of Peradeniya, Sri Lanka, 2013) Padmasiri, R. C. P.; Dayaratna-Banda, O. G.
Introduction: Monetary policy in Sri Lanka, targets maintenance of monetary growth that is consistent with economic and price stability and stability in the financial system. The primary tools of policy instruments are Central Bank policy interest rates. Economic theory offers two seemingly contradictory views on money and interest rate relationship (Monnet and Weber 2001). The liquidity effect view states that money and interest rates are negatively related (Christiano et al., 1999). Money is a decreasing function of the nominal interest rate because the interest rate is the opportunity cost of holding liquidity. In the Fisher equation tradition, money and interest rates are positively related. Increasing interest rates requires an increase in the rate of money growth. The Fisher equation states that the nominal interest rate equals the real interest rate plus the expected rate of inflation. This paper mainly focuses on the liquidity effect view and the Fisher effect view. Most empirical studies have found a relationship between money and interest rates (Monnet and Weber 2001). Nevertheless there are not many studies done previously on Sri Lanka. The available studies have not used modern econometric methods for estimation, latestdata and coverage is narrow (Wijewardena, 1985; Silva, 1977). This scenario motivates us to analyze the relationship between money supply and interest rates in Sri Lanka using current data and up to date methods.
The relationship between money demand and interest rates: an empirical investigation in Sri Lanka
(University of Peradeniya, Sri Lanka, 2013) Padmasiri, R. C. P.; Dayaratna Banda, O. G.
Introduction: The interest elasticity of the demand for money is an important indicator in considering an effective anti-inflationary monetary policy (Hossain and Younus, 2007). Identifying the empirical relationship between money demand and interest rates is important in effective formulation of monetary policy in Sri Lanka. The relationship between money demand and interest rates has been explained by various theories including classical quantity theory approach, Cambridge approach, Keynes’s liquidity preference theory, Baumol-Tobin money demand theory and Friedman’s modern quantity theory of money. In liquidity preference theory, Keynes postulated that there are three motives behind the demand for money: the transactions motive, the precautionary motive, and the speculative motive. Baumol (1952) and Tobin (1956) independently developed similar models for demand for money, which demonstrated that even money balances held for transactions purposes are sensitive to the level of interest rates. As interest rates increase, the amount of cash held for transaction purposes will decline, which in turn means that velocity will increase as interest rates. A few studies for money demand relations have been done for Sri Lanka since 1990 (Wijewardena, 1985). However most of these studies explain fiscal and monetary policy issues and behavior of interest rates. There is a dearth of empirical studies which examined the relationship between money demand and interest rates using Baumol- Tobin Model for Sri Lanka. Some studies examined the relationship between money demand and interest rates using Keynesian theory.
Impact of public education spending on economic growth in Sri Lanka
(University of Peradeniya, Sri Lanka, 2013) Vijesandiran, S.; Prabanantharaja, E.; Herath, H. M. A. M. K.
Introduction: Education is considered a major source of per capita output and economic development of a country. Usually, the development of education provides a strong impetus for economic growth through human capital formation and improving productive capacity of the labor force of a country. The Sri Lankan Government’s commitment to spending on education since introduction of free education in 1945 has played a tremendous role in achieving national development of the country. But, the importance of education spending in Sri Lanka seems to be given low priority after liberalization of economy in 1977. The positive effect of education on economic performance and the functional relationship between education and economic growth experienced in many cases have been identified (Maritra and Mukhopadhyay, 2012; and Schultz, 1988). However, the contribution of education spending on economic growth in Sri Lanka is still a controversial issue due to the lack of literature in this area of study.
Government welfare expenditure and economic growth in Sri Lanka: a comparative analysis of different policy regimes
(University of Peradeniya, Sri Lanka, 2013) Wickramasiri, R. S.; Herath, H. M. W. A.; Vidanage, T. N.
Introduction: The specific feature of the government policies that were implemented by the different regimes that came into power in Sri Lanka after independence was the intervention in socioeconomic affairs and the diversity of the process of intervention. The elected governments allocated a considerable percentage for welfare from aggregate government expenditure. The main goals of government expenditure were to accelerate economic growth, uplift the living condition of the population and achieve social development. This study examines the relationship between economic growth and government welfare expenditure, with reference to different policy regimes; 1959-1977 (Inward-looking), 1978-2005 (Outward-looking economic policies) and the Mahinda Chinthana policy regime. Many studies concerning economic growth start from the aggregate production function where factors of production determine the national output. According to the Neo-classical theories growth comes from three ways, if land is fixed. Those are increase in labor supply, increase in the capital stock and increase in productivity. The effectiveness of education, health and overall social welfare expenditure are very much crucial for the development of all the three factors mentioned above. Many studies have been conducted on examining the relationship between government expenditure and economic growth. As a whole, the conclusions of these studies are quite contradictory. Alam and Mohammad (2010) and; Jiranyakul & Brahmasrene (2007) have found a positive relationship between government expenditure and economic growth. Baum & Lin (1993) and Sjoberg (2003) have found a negative relationship between government expenditure and economic growth. Apart from that, what has been indicated by the study on Sri Lanka by Abhayaratne and Kalansooriya (2008) is that additional growth gained by the investment of welfare resources is not quite proportional for achieving higher economic growth. It has been further explained that without the higher welfare expenditure, the social indicators would never be able to achieve their present status; also, a considerable level of economic growth can never be achieved. In each of these studies, welfare expenditure is considered as government expenditure. Although the relationship between economic growth and the government welfare expenditure has been studied in Sri Lanka, it is not examined in terms of the different policy regimes. This study aims to fill this lacuna by analyzing the relationship between government welfare expenditure and economic growth with reference to different policy regimes during the period of 1959-2009.
Fiscal deficit and inflation dynamics in Sri Lanka: an empirical investigation of causal relationships
(University of Peradeniya, Sri Lanka, 2013) Zoysa, Ushanthi Manjula; Sivarajasingham, S.
Introduction: In Less Developed Countries, including Sri Lanka, the fiscal deficit has been blamed for much of the economic problems such as high inflation, debt, etc. During the last few decades, Sri Lanka has faced an upward trend in the general price level and expansion of its budget deficit. The relationship between inflation and fiscal deficit is important and controversial, one of the most widely debated topics among academics as well as among economics policy makers in both developed and developing countries. Good understanding of the dynamic relationship between inflation and fiscal deficit is important in policy planning. In-depth empirical analysis of dynamic linkages between these variables in Sri Lanka will provide useful directions for future research. Several studies have examined the interrelationship between these variables related to developed countries and developing countries except for Sri Lanka. Fiscal based theories of inflation have been especially prominent in the developing countries’ literature (Alesina and Allen, 1991) Further, Metin (1998) argues that there is a positive relationship between the budget deficit and Inflation. Contrary to the above, Sahan and Bektasoglu (2010) have showed a negative relationship in some countries. Chimobi and Igwe (2010) find bidirectional causal relationships between both variables. However, in Sri Lanka, this dynamic relationship has not received much attention in the literature. Very few studies have attempted to study about inflation determination. There exists no in-depth technical analysis on dynamic behavior and its statistical properties of the dynamic relationship in Sri Lanka. The current study intends to fill this gap in the literature and provide an in-depth analysis. This paper empirically tests whether the time path of the government budget deficit in Sri Lanka has an impact on inflation.
Effects of financial liberalization on financial development: an empirical study with reference to Sri Lanka
(University of Peradeniya, Sri Lanka, 2013) Bandaranayake , A. B. T. M. A. R.; Dayaratna Banda, O. G.
Introduction : The relationship between liberalization and financial development has been well documented in literature. A considerable body of theoretical literature suggests a positive relationship between capital account liberalization and financial development. Klein and Giovani (2000) showed a statistically significant relationship between liberalization and financial development. They also argued that openness of capital account affects financial deepness and economic growth. Empirical results of Chinn and Hiro (2005) suggest that financial openness does contribute to equity market development, but only when a threshold level of general development of legal systems and institutions has been attained. Eichengreen et al. (2009) find reasonably strong evidence that financial openness has positive effects on the growth of some industries, although these growth-enhancing effects evaporate during financial crises. Also there is evidence that the positive effects of capital account liberalization are limited to countries with relatively well-developed financial systems, good accounting standards, strong creditor rights and rule of law. In the case of Sri Lanka, there is a dearth of studies that empirically examines the impact of capital account liberalization on financial development and we will focus on that issue.

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