No abstract

Price dynamics in Indian cities were examined using cointegration analysis. We identified and calculated a common trend for prices in 25 major cities in India. Impulse response functions were obtained to calculate the rates of convergence to the prices and we found that the half-life of any shock is very small for Indian cities. Although a close to three-month half-life seems too fast, there is some indication in the literature that half-life can be much smaller than the conventional rates of 3 to 5 years. We have calculated half-life using the panel unit root method, and found that estimates of half-life from cointegration analysis provide a faster convergence rate than estimates using the panel unit root method. We also analyzed how shock can be transmitted from one city to another and found no systematic behavior of transmission from one city to another. JEL Classification Code: F15, E31, C23.

Behavioral di¤erences between economies where infrastructure is privately provided and where the government is the sole provider are examined in the context of a growing economy. The choice between private and public provision generates di¤erences in the private sector's ability to internalize capital utilization decisions and market prices along the equilibrium path. This in turn has a crucial impact on the e¤ects of …scal policy on resource allocation and welfare in each regime. If the government wants to stimulate infrastructure investment, a subsidy to private providers yields signi…cantly higher welfare gains than an equivalent increase in direct government investment, even with lump-sum tax …nancing. On the other hand, an income tax is more distortionary under private than under government provision. In designing optimal …scal policy, while a constant income tax-infrastructure subsidy combination is jointly required to attain the …rst-best equilibrium under private provision, the optimal income tax rate must be time-varying under government provision.

No abstract

No abstract