Vighneswara Swamy

Vighneswara SwamyVighneswara Swamy is University Professor at IBS-Hyderabad and has been teaching students of the MBA program. He is a Post-Doc Fellow in Financial Economics. He served at the Institute of Economic Growth as Senior Fellow. His research interests include international economics, financial economics involving banking and finance, macroeconomics, and development economics. He has published in globally reputed journals such as World Development, The World Economy, Applied Economics Quarterly, Journal of Financial Economic Policy, and other top-rated economics journals. Some of his accomplishments in economic research include several awards and recognitions like; UGC Post-Doctoral Research Award, IIBF Macro Research Award 2012, Sir Ratan Tata Trust Research Fellowship 2012-14 at ISEC, Bengaluru, SANEI Regional Research Fellowship 2013, IIBF Macro Research Award 2015-16, and SANEI Regional Research Fellowship 2015. Professor Swamy was felicitated at 2nd International Conference ‘Reshaping Organizations to Develop Responsible Global Leadership’ organized by Nepalese Academy of Management held in March 2013 as the Plenary Speaker. He was the Conference Chair of the 9th International Conference on Business & Finance (ICBF) – 2012 held on January 6 and 7, 2012 at Hyderabad, India.

Papers Published in World Economics:

Household Consumption and Income Inequality

This article seeks to explore the extent to which household consumption causes income inequality and addresses the questions: (i) is there a linear relationship between household consumption expenditure and income inequality? (ii) what is the causal relationship between household consumption and income inequality? and (iii) does household consumption impact differently on rural and urban income inequalities? The results provide evidence of rising consumption inequality causing rise in income inequality. The causality tests show the presence of a unidirectional causality flowing from household consumption to income inequality. The findings provide insights that macroeconomic policymakers can use to manoeuvre household consumption expenditure using appropriate policy instruments.

Read Full Paper >

The Empirics of Borrower Transaction Costs in Models of Financial Intermediation for the Poor

This study explores the determinants of borrower transaction costs of the models of financial intermediation for the poor while they avail of finance from the institutional and informal sources in India. The loan size is an essential determinant of borrower transaction costs of the bank lending model. Though the loan size and age of the borrower are key determinants in the SHG lending model, the relationship is direct and not inverse as in the case of the bank lending model. The study shows that the distance from the borrower's household to the financial intermediary (spatial element) exerts a significant effect on the borrower transaction costs. This underscores the importance of the expansion of the networks of the financial institutions as well as imbibing modern information technology for reducing such distance between the borrower and the financial intermediary for lowering transaction costs. The borrowers with a higher level of education and being of an older age are found to experience reduced transaction costs. Though the age of the borrower is one of the determinants of the borrower transaction costs in the SHG lending model, the relationship is direct and not inverse as in the case of the bank lending model.

Read Full Paper >

Measuring the Efficacy of Financial Intermediation

This study focuses on the transaction costs of borrowing by the poor and provides an empirical assessment. In doing so, this study addresses two salient questions: (a) what are the transaction costs for borrowing poor? and (b) how significant are these transaction costs for the poor in deciding whether to borrow from an institutional or an informal source? The study area includes southern, western, northern, eastern, and central regions of India. Using a stratified random sampling approach this study captures comprehensively all the forms and variants of microfinance intermediation in India. The sample also covers three broad social categories—scheduled castes and scheduled tribes, other backward classes, and other social groups—and studies three major approaches to financial intermediation: the direct lending model, self-help groups (SHG) and microfinance institutions (MFI). The results indicate that borrower transaction costs in the direct lending model are 9.06% in rural areas, 9.57% in semi-urban areas and 10.93% in urban areas, with an overall average of 9.85%. Under the SHG lending model borrower transaction costs range between 3.62% in rural areas, 3.70% in semi-urban areas and 3.93% in urban areas, with an overall average of 3.75%. Similarly, the MFI lending model has borrower transaction costs of 7.70% in rural areas, 7.91% in semi-urban areas, 8.43% in urban areas, and the average is 8.02%. The findings provide the required insights for policy support needed to lessen the burden on the beneficiaries of microfinance. Accordingly, the SHG lending model, with the lowest borrower transaction costs, is suitable for microfinance intermediation in rural areas.

Read Full Paper >

Monetary and Fiscal Policy Coordination During Fiscal Dominance Regimes

This study empirically examines the interaction between monetary and fiscal policy by using vector auto regressions (VAR) and a vector error-correction model (VECM) and explores the need for coordination. • We also analyse a Stackelberg interaction model with government leadership to know the strategic interaction between monetary and fiscal policy. The findings show that an unexpected increase in the monetary policy effect: (i) has a contractionary impact on economic growth; (ii) leads to a gradual decline in inflation; (iii) tightens liquidity conditions; and (iv) leads to a rise in bond yields. On the other hand, an unexpected increase in the fiscal policy effect: (i) has a positive effect on GDP growth; (ii) prompts an initial decline, then a gradual rise in inflation levels; (iii) leads to falling bond yields. Monetary policy is found to be more responsive to fiscal policy effects. The results imply that there is a greater need for effective coordination between monetary and fiscal policy as a sufficient condition to achieve economic stability.

Read Full Paper >

Macroeconomic Impact of Eurozone Debt Crisis on India

The eurozone represents a significant market for emerging markets like India; hence, any stagnation or a downturn in the eurozone leaves a dent in their export growth. Sensitivity analysis using measures of direct and indirect export dependency through international production networks and other economies suggests that the eurozone crisis impacted through the trade channel. As the impact of the eurozone debt crisis was significantly negative, the levels of dependence on the USA and China continued to be stable without experiencing any sharp deviations. It is desirable for India to diversify its export markets and to further strengthen domestic institutions and policies to reduce the impact of such crises and shocks.

Read Full Paper >

Estimating Loss-in-Output as a Cost of a Financial Crisis

The global financial crisis caused a huge loss of economic output, depletion of financial wealth, extended unemployment, psychological consequences and other significant costs. A quantitative exploration of modelling loss-in-output as a cost of financial crisis using macroeconomic indicators is useful in understanding the impact of a crisis. The conservative estimates for India suggest that, over a period of ten years, a financial crisis can cause a cumulative loss-in-output ranging from 48% of GDP to 59% of GDP after discounting at 0.025 and 0.07 respectively. Intermediate values are also explored. Estimating loss-in-output in terms of GDP simplifies estimation of the impact of financial crises. Policymakers and regulators must be more prudent and alert in sensing the early indicators of a financial crisis and act swiftly in containing its perils.

Read Full Paper >

Using the World Bank’s Bank Data to Assess Changes in Financial Regulation and Supervision since the Global Financial Crisis

The World Bank’s Bank Regulation and Supervision Survey (BRSS) data can be used to gain insights into bank regulatory/supervisory styles across countries. The data illustrate the differences in regulation/supervision among crisis, non-crisis and BRICS countries, and highlight changes in regulation and supervision during the crisis period. The results indicate that the crisis countries had weaker regulatory and supervisory frameworks than those in emerging countries during the crisis. As a distinct block BRICS countries demonstrated uniqueness in their regulatory/supervisory styles, which are similar neither to those in the crisis countries nor to those in the non-crisis countries.

Read Full Paper >

Debt, Economic Growth and Data Adequacy

The effects of government debt on economic growth has become of immense importance in the backdrop of the Eurozone sovereign debt crisis and Reinhart & Rogoff’s related research. This study is based on a sizeable dataset which extends the horizon of analysis to country groupings and makes it inclusive of economic, political, and regional diversities. The study overcomes issues related to data adequacy, coverage of countries, heterogeneity, endogeneity, and non-linear relationships by conducting a battery of robustness tests. An increase in the debt-to-GDP ratio is found to be associated with a reduction in average growth, but the relationship is nonlinear.

Read Full Paper >

Using Indian Data to Measure the Impact of the Eurozone Debt Crisis Through the Financial Channel

Economic data for the period 2000 to 2013 shows that the sovereign debt crisis in the Eurozone had a macroeconomic impact on India by transmission through financial channels. Capital flows into India slowed down significantly due to the crisis: net external loans availed by banks stood at US$2.7 billion in the third quarter (Q3) of 2012–13 as against outflows of US$87 billion in Q3 of 2011–12. The number and quantity of Euro issues by Indian firms declined from INR159.6 billion (with 18 issues) in 2009–10 to only INR10.3 billion (with 5 issues) in 2012–13 and portfolio investments into India fell significantly. One significant lesson from the Euro debt crises is that the Indian financial system is relatively more open than that of the Chinese.

Read Full Paper >