The Power of Peer Pressure :: Peer Pressure Essays

According L K Cardin Smith and S a Fowler from the department of continuing education. Classroom peers can serve as powerful sources of reinforcement in increasing or maintaining both the positive and negative behaviors of their classmates. In two experiments, we examined the effectiveness of a peer-monitored token system on reducing disruption and nonparticipation during a transition period of a kindergarten class for behaviorally impair children. Additionally, the effect of providing and subsequently withholding corrective feedback to peer mediators on the accuracy of their point awards was evaluated. Results in Experiment 1 suggest that both teacher- and peer-monitored interventions were successful in decreasing disruption and increasing participation of monitored peers. Experiment 2 further demonstrated that peer monitors could successfully initiate the token system without prior handsome implementation. Analysis of the point awards in both experiments indicates that peer monit ors consistently awarded points that were earned. However, when corrective feedback was withdrawn the peer monitors frequently awarded points that were not earned, i.e., they rarely withheld points for undesirable behavior. Even so, the monitored peers exuberant behavior was maintained at low rates.Teens arent the only affected by it. Its an epidemic. That challenges everyone, not only kids or teens but teens and adults alike.The main consequence of state no to negative peer pressure is not just withstanding The heat of the moment, as most adults think. Rather, it is coping with a sense of exclusion as others employ in the behavior and leave the adolescent increasingly alone. It is the red of the shared experience. Further, the sense of exclusion remains whenever the group later recounts what happened. This feeling of loneliness indeed becomes pervasive but carries an easy solution -- go along with the crowd.(MICHAEL RIERA, Uncommon Sense for Parents with Teenagers)(http//www.n otable-quotes.com/p/peer_pressure_quotes.htmlJFfXdBCK18YwLwIx.99) Peer Pressure affects everyone differently. For example, adults might be pressured to do something for work. The loss of what would happen if they didnt do it is the motivation. Sounds like blackmail, to me. However teens might be pressured into something by their friends this could go either way.Before I go much farther. Theres two types of peer pressure positive and negative.Positive is when someone helps you to do something that you wouldnt have had the courage to do on your own. Some examples could include doing a restore in choir, or trying out for a sport.Negative peer pressure however, is when someone constantly tells you should try it.

Urban Legend of Ghostly Dreams :: Urban Legends

Ghostly Dreams of Owners PassedThe following contact story was t grey-headed to me by a friend when I had a small group of friends over to my house in Massachusetts during spring break. He is a 20-year-old white male. The story was told at night after we had finished watching the show Lost on television, so the atmosphere was a little bit tense. It did not simply come up in context I prompted all of my friends to tell any ghost stories or urban legends that they knew. I wrote the story down a few hours later after my friends left. This is as close to the story he told as I could remember at that timeMy friends house is wicked old. Built in the 1700s, theres a lot of really old stuff there. It may have been involved in the Underground Railroad. It has secret passageways and windows for servants to look in and talk to their masters. They originally lived in Springfield, Mass. and he his friends Dad knew the two people in the house in Agawam, Massachusetts previously. When he found out it was going on the market he decided to go buy it. Before they managed to complete the sale unmatched of the two ladies died. And the other lady either died or left. At least one of them died in a room in the house. So after that they still decided to take the house. There were a few times when he tried to find things. And one time in particular he was looking for a ladder. He looked everywhere around the house including inside, outside, and in the shed. That night he had a aspiration and the dead previous owner came to him in the dream and told him to look in the shed again. The next day when he looked in the shed, the ladder was sitting decline directly in the middle of it just like she had said in his dream. There was no way he could have missed it the day before. This happened on a couple different occasions with other items as well.As he told the story he used small hand motions to emphasize primary(prenominal) points of the story and he paused after i mportant points to allow the information to sink in he did not sound nervous while telling the story, that he did try to convey a spooky atmosphere in an attempt to scare the audience.

Free Hamlet Essays: The Great Actor in Hamlet :: GCSE Coursework Shakespeare Hamlet

The Great Actor in hamlet       Hamlet is sane, not insane.  He is putting on an act making people think that he is really insane when he is really just playacting.  Hamlet was ordered to retaliate his fathers goal by his fathers spirit.  The spirit told Hamlet that how he died.  The spirit said that he was sleepong in his garden when the uncle came and poured poison into his ear.  The spirit told Hamlet to avenge his death by killing his uncle.   Hamlet wanted to prove that his uncle really killed his father.  His uncle married his mother shortly after the murder of Hamlets father.  I think Hamlet is glaring inside beacuse he suspects what really happened.   People think Hamlet is insane but he is really only acting.  After Hamlet has spoken to the ghost, and Horatio and Marcellus attain him, emotionally disturbed he says, As I perchance hereafter shall think meet to put an antic disposition on... to not e that you know goose egg of me--this do swear.  (Act 1, scene 5, line 191-192, 201)  This means if I (Hamlet) act crazy in the future, dont take it seriously, I am just acting.  Hamlet acting crazy will help him prove that his uncle indeed killed his father.               Hamlet wanted to know if what his fathers spirit told him about his uncle killing his father was true, so he got the ruff actors he could find and reenacted what he though the death of his father was like, to see what his uncles reaction would be.  When he saw his uncle storm out of the room he knew it was true.  If he were insane he could not have thought of such a good plan to catch the conscience of the King (Act 2, scene 2, line 634).   Hamlet wanted the king to think he was insane.  The king did think Hamlet was insane.  The King talking to Rosencranz and Guildenstern says, something have you heard of Hamlets transformati on, so call it, sith nor thexterior nor the inward composition resembles that it was.  (Act 2, scene 2, lines 4-7).  Hamlet wanted the king to think he was insane because he didnt want the king to interfere with his plan to find out if he really killed his father.  He acted insane because he knew if he did the king would stay out of his way and he would have time to put his plan into operation.

A Comparison of the Portrayal of Boo Radley in To Kill a Mockingbird :: English Literature

A Comparison of the portrayal of Boo Radley in To Kill a Mockingbird and Miss Havisham in great expectations.In To Kill a Mockingbird the author uses a retrospective narration,this means that we can see events through the eyes of a child, yet as well as has the intelligence of an self-aggrandizing to explain the eventsthouroghly. Because narrator has personal experience of what happenedwe hold a closer insight into the details. This method of reflectionmeans that we can understand other characters feelings more(prenominal) easily,and the settings and ways of Maycomb. Great Expectations is similarto To Kill a Mockingbird it also has shows the events of a personfrom childhood to becoming an adult. The story follows Pip, who is themain character in this novel it shows him as a child, beingintroduced to Miss Havisham, then later on as a main person in MissHavishams life. Pip and Scout protagonist us to understand the feelings ofother characters..To Kill a Mockingbird is set in the 1 930s, in a town called Maycomb.It is a small town with a close-knit community, it has a deserted feelto it, however it is very tense, with a lot of families and rumoursand gossip. Maycomb is also a claustrophobic place to be, with theidentical houses, the grass on the sidewalks (unkempt), and also it isvery dusty, hot and humid. The neighbours are known to be verysuspicious and judgemental. It is a reserved community and it can getvery dull. In Great Expectations, in the chapters that we have read,rather then it being concentrated on a town, it is mostly concentratedon Miss Havishams House. Satis House, which stand for very big andsatisfactory. deep down this house everything is kept the way it was atthe time of the wedding. With cobwebs, and dust on all the furniture.Even the surrounding of the satis house was dying there was a superbrewery, no brewing was going on in it, this shows that everythingaround miss Havisham was a symbol of what was within her. It showsthat she is dead within. Both Boo Radley and Miss Havisham live(a) inseclusion, this means they prefer to be cut off from the outsideworld, a quote that show this is some of the windows had been walledup However they both have someone to help them with life, Boo Radleyhas his brother Nathan, and Miss Havisham has her adopted daughterEstella. Miss Havisham acts this way because of what happened to herearlier in her life she was left at the altar.

Macbeths Implacable Guilt Essay -- Macbeth essays

Macbeths Implacable Guilt The Shakespearian tragedy Macbeth underscores the important and usually unforeseen effect of sin, that of guilt. The guilt is so dusky that gentlewoman Macbeth is pushed to suicide, and Macbeth fares only slightly better. Blanche Coles states in Shakespeares Four Giants that, regarding guilt in the play Briefly stated, and with elaborations to follow, Macbeth is the story of a kindly, upright man who was incited and goaded, by the womanhood he deeply loved, into committing a murder and then, because of his sensitive nature, was unable to bear the heavy burden of guilt that descended upon him as a result of that murder. (37) A.C. Bradley in Shakespearean Tragedy demonstrates the guilt of Macbeth from the very beginning Precisely how far his mind was guilty may be a question but no transparent man would have started, as he did, with a start of fear at the mere prophecy of a crown, or have conceived thereupon immediately the belief of murder. Either this thought was not new to him, or he had cherished at least some vaguer dishonourable dream, the instantaneous recurrence of which, at the spot of his hearing of prophecy, revealed to him an inward and terrifying guilt. (316) In his book, On the Design of Shakespearean Tragedy, H. S. Wilson comments regarding the guilt of the protagonist It is a subtler thing which constitutes the chief fascination that the play exercises upon us - this fear Macbeth feels, a fear not fully defined, for him or for us, a terrible anxiety that is a sense of guilt without becoming (recognizably, at least) a sense of sin. It is not a sense of sin because he refuses to recognize such a category and, in his stubbornne... ... Frye, Northrop. Fools of Time Studies in Shakespearean Tragedy. Toronto, Canada University of Toronto Press, 1967. Kemble, Fanny. Lady Macbeth. Macmillans Magazine, 17 (February 1868), p. 354-61. Rpt. in Women Reading Shakespeare 1660-1900. Ann Thompson and Sasha Roberts, eds. M anchester, UK Manchester University Press, 1997. Shakespeare, William. The Tragedy of Macbeth. http//chemicool.com/Shakespeare/macbeth/full.html, no lin. Siddons, Sarah. Memoranda Remarks on the Character of Lady Macbeth. The Life of Mrs. Siddons. Thomas Campbell. London Effingham Wilson, 1834. Rpt. in Women Reading Shakespeare 1660-1900. Ann Thompson and Sasha Roberts, eds. Manchester, UK Manchester University Press, 1997. Wilson, H. S. On the Design of Shakespearean Tragedy. Toronto, Canada University of Toronto Press, 1957.

Macbeths Implacable Guilt Essay -- Macbeth essays

Macbeths Implacable Guilt The Shakespearean tragedy Macbeth underscores the important and usually unforeseen effect of sin, that of guilt. The guilt is so deep that bird Macbeth is pushed to suicide, and Macbeth fares only slightly better. Blanche Coles states in Shakespeares Four Giants that, regarding guilt in the play Briefly stated, and with elaborations to follow, Macbeth is the story of a kindly, upright universe who was incited and goaded, by the woman he deeply loved, into committing a murder and then, because of his sensitive nature, was unable to bear the heavy burden of guilt that descended upon him as a result of that murder. (37) A.C. Bradley in Shakespearean tragedy demonstrates the guilt of Macbeth from the very beginning Precisely how far his mind was guilty may be a question but no innocent man would have started, as he did, with a start of timidity at the mere prophecy of a crown, or have conceived thereupon immediately the thought of murder. both this th ought was not new to him, or he had cherished at least some vaguer dishonourable dream, the instantaneous recurrence of which, at the moment of his tryout of prophecy, revealed to him an inward and terrifying guilt. (316) In his book, On the goal of Shakespearean Tragedy, H. S. Wilson comments regarding the guilt of the protagonist It is a subtler thing which constitutes the chief fascination that the play exercises upon us - this fear Macbeth feels, a fear not fully defined, for him or for us, a terrible anxiety that is a smack of guilt without becoming (recognizably, at least) a sense of sin. It is not a sense of sin because he refuses to recognize such a category and, in his stubbornne... ... Frye, Northrop. Fools of Time Studies in Shakespearean Tragedy. Toronto, Canada University of Toronto Press, 1967. Kemble, Fanny. Lady Macbeth. Macmillans Magazine, 17 (February 1868), p. 354-61. Rpt. in Women Reading Shakespeare 1660-1900. Ann Thompson and Sasha Roberts, eds. Manches ter, UK Manchester University Press, 1997. Shakespeare, William. The Tragedy of Macbeth. http//chemicool.com/Shakespeare/macbeth/full.html, no lin. Siddons, Sarah. Memoranda Remarks on the Character of Lady Macbeth. The Life of Mrs. Siddons. Thomas Campbell. London Effingham Wilson, 1834. Rpt. in Women Reading Shakespeare 1660-1900. Ann Thompson and Sasha Roberts, eds. Manchester, UK Manchester University Press, 1997. Wilson, H. S. On the Design of Shakespearean Tragedy. Toronto, Canada University of Toronto Press, 1957.

Freud’s Psychoanalytic Approach to Psychology

The psychoanalytic approach to psychology is based on the system of psychoanalysis, actual by Sigmund Freud (1859 1939). Freud was interested in studies of the unconscious mind and moral illness. He preformed studies to look into human record, psycho informal development and conducted method of treatments to determine the causes of neurotic mental illness.Freud thought that mental illness was caused by early childhood trauma of which treatment for such illness could only be successful when these childhood memories were dealt with and overcome. He developed his own technique to try and remember and overcome the events from their past that had disturbed their development. He made his patients describe anything that came into their mind no matter how dizzy they thought it may be. This technique helped Freud determine the cause of the mental illness and encouraged the patient to resurface repressed memories. Freud thought this would help them come to cost with the events helping ov ercome the illness, which was said to be removing the neurosis.According to Freud, everything we do, why we do things, who we atomic number 18 and how we became like this are all related to our sexual drive. Childhood sexual experiences forget determine our personality in adult life. Freud outlined 5 stages of sexual development. In each stage the libido, the energy from the love instinct, Eros, fixates on opposite parts of the body, focusing on sexual pleasure on that specific part. Differences in the way sexual pleasure is obtained in each stage willing lead to differences in adult personalities.Oral phase This occurs from birth to 8 months old when the libido fixates on the mouth. Sexual pleasure is obtained by sucking, gumming, biting and swallowing. Insufficient and physical feeding can cause fixation in this stage causing symptoms like smoking, eating and drinking to excess, argumentative, sarcastic, demanding and exploitive personalities in adult life.Anal Stage This occurs from 8 months to 4 years old when the libido fixates on the anal orifice. Sexual pleasure is obtained through stimulation of the anal membrane with bowl movement and keep back of such movement. Fixation in this stage can be caused by how the child copes with toilet training and how they are trained by their parents. There are 2 types of anal fixation.Phallic Stage This occurs from 3-6 years old, when the libido fixates on the genitals. Sexual pleasure is obtained through stimulation of the genitals. The key event at this stage is the love to the parent of the opposite sex together with the envy and business of the parent of the same sex. In boys this situation is called the Oedipus Complex and in girls it is called the Electra Complex. Boys experience castration anxiety caused by the fear of the fathers punishment for the desire for his m separate, which is overcome when his conscious comes to realise that incest is wrong. Girls on the other hand experience penis envy bel ieving that they once had a penis, but cod to castration has lost it. She becomes hostile and aggressive towards her mother who she believes did the castration and a special tenderness for her father. This is overcome when the girls affections are directed towards other males.The Latency result This occurs from 5-12 years when the libido is de-sexualised and directed out into peer group activities. It is a stage where there is little sexual activity and allows children to focus their energy on other aspects of life. Earlier sexual activities are repressed to the unconscious mind and this stage lasts until puberty when their sexuality is re-awakened.Puberty and Adolescence This occurs from 12-16years when all sexual impulses re-appear. The child experiments with all their foregoing patterns of sexual activity until gradually leading to normal genitality. After this stage the individual will develop intimate sexual relationships.Freuds theories enabled him to develop a energizin g model of personality. His writings on psychosexual development set the groundwork for how our personalities developed. He also believed that there were 3 different driving forces that develop during these stages which play an important role on how we interact with the world.According to Freud we are all born with our Id. This is a drive that needs immediate satisfaction and does not figure anything else. Like a newborn baby, the Id is present at birth and causes the baby to cry when it needs feeding, changing, and is the babies way of getting its needs met immediately. The second part of our personality comes within the next three years, which Freud called the Ego. As the child interacts more with the world they learn and understand the needs and desires of others. It is the Ego that works to satisfy the Id, as salubrious as considering others. Eventually, usually after the phallic stage of development, the Super-Ego develops. This is the moral part of our personality letting us know what is right and what is wrong.Freuds theories brought with them a lot of criticism. umpteen psychologists thought Freuds theories were imprecise and un-testable, as in the latency period of psychosexual development all experiences and sexual activities in the earlier stages are repressed. This meaning the individuals will have no memories of these experiences, therefore they can not be proven. His theories were said to be unfair in the way they had been studied. It was based on a petite sample of people which were middle class, middle aged Jewish women, most of which had mental illnesses. These factors such as age, gender, culture and mental state should have been considered bowl Freuds studies as they could well be factors that also affect the way in which we develop mentally and sexually and could differ from each individual dependent upon these factors.

Normality Is Simply the Absence of Abnormality

Life is complex and things do not always go smoothly. We are all debauched by major and minor tragedies. So why are some people, save not opposites, able to cope with lifes problems. What is abnormal appearance? Most of us would have a difficult time precisely specifying the differences between normal and abnormal behaviour. Some psychologists have argued that abnormal behaviour is culturally defined, and that behaviour that is considered evidence of a mental disorder in one culture, would be considered normal in another.There may be some rightfulness in this, but severe disorders such as schizophrenia occur in people of all cultures, regardless of their particular lifestyles. People whose behaviour differs widely and steadily from normal social requirements or social norms are called abnormal. Societies differ in their requirements, an act that is normal in one place may be abnormal in another. There is no society that does not have some moral, ethical or criminal laws. In eve ry society, consistent, serious and incompatible disobedience is considered a sign of abnormality. How exactly do we distinguish normal from abnormal behaviour?Abnormal behaviour is fairly easy to recognise but difficult to define precisely. Various psychologists have suggested the following four major criteria of abnormality, although no single criterion is completely satisfactory. *Abnormal as infrequent. *Abnormal as deviant. *Abnormal as maladaptive, and *Abnormal as personal distress. At some time all of us feel, think or act as demented people would much of the time. We too may be anxious, depressed, withdrawn or anti-social. Abnormal people share these characteristics with normal people, but their experience is intensified and to a greater extent enduring.Most people would agree that someone who is too depressed to get out of bed for weeks at a time is suffering from a mental disorder. But what about those who, having experienced a loss, are unable to resume their usual so cial activities? Where should we draw the line between normality and abnormality. In other words how should we define psychological disorders? Or equally important, how should we understand disorders as sicknesses that need to be diagnosed and cured, or as natural responses to a troubled environment.

Political Analysis on China Essay

mainland china has been under the communist party rule for many decades. The communist party exercises absolute superpower over legislations and economic and cultural institutions. chinaw are rules and regulations are not so transparent or absolute. due(p) to lack of transparency and corruption the social vane with the people from the communist party can help the assembly line avoid red tape and bureaucracy.A semipolitical risk refers to government interference in the art affairs of foreign persons or companies doing business in a particular country.mainland China is particularly hazardous with respect to political risk. In fact this has occurred in china in 1949. at that place are the risk of confiscation, risk of expropriation, and risk of contract repudiation.A unique form of political risk occurs in china, and this is the constant contend between the countrys central government and the provincial and local governments over applicable law, and observance or non-observance of it. This makes it difficult for companies operating in China to know exactly what the rules are.Other Political risk of China are as follows-1) Political Effectiveness- Political effectiveness is actually not very effective in china as compared to other countries. Barely anyone bothers to call the police and they be easily bribed. Road laws are not enforced and thus thither is a high rate of accidents in China with the way they drive. The government is even less confident than outside observers regarding their nations political stability.2) institutional Stability- Corruption still plays a huge role in China. They believe that profit comes first and mostly for personal reasons. At first it was only the Chinese Communist Party who took control in 1949. Later the other branches such as the Judicial Branch came into power in 1980.3)Currency inconvertibility The import and export business exchange currencies in both USD or RMB. Only certain worldwide currencies can be exchanged i n China, other than that they use the RMB.4) Honest Government- There are many cases known to justify corruption among government officials. Policies and laws are not solid or stable in China, therefore everything is negotiable. The CPI ratings of China are 3.5 this year. This looks bad compared to the United States and Canada. 106,000 officials were prosecuted for corruption in 2009 which was a 2.5% increase from 2008. With Chinas growing economy, it will only get worse.Minimizing Political Risk- For minimizing political risk we should regard the importance of social networks and their relationship. It is a challenging process for a company to recruit the function people with the appropriate network to whip these challenges.Legal System- For thousands of years, the Chinese legal system was based on Confucian ideology that emphasized ethics and relationships between the people and their drawing cards. China does not technically make up an independent judiciary or a legal system that operates outside the influence of the ruling Chinese Communist Party. In fact, Chinas lack of an independent judicial system.Legal and Regulatory Risk Regulatory risk in China is high. Although many sectors of Chinas economy have become more market oriented, numerous restrictions and a massive bureaucracy still hinder full implementation of regulations and make the approval process unpredictable.Chinas Judicial System- Using Chinas judicial system excessively involves risk. Because of Chinas WTO membership and growing pressure from foreign investors for great transparency and rule of law, China increasingly recognizes overseas arbitration awards and rulings. It is, however, still risky for companies to rely solely on the PRC judicial system to shelter their interests. Similarly, Chinas accession to the WTO has brought with it the inclusion of international business laws and patent rights amendments, but even today it is common to see technology being stolen either by the emp loyees of the outsourced firm in China or by a Chinese competitor in the country.Protection from foreign Currency Earning Enterprises- The cost of doing business in China is frequently higher than companies expect. These issues, coupled with a recent rise in policies aimed at protecting domestic companies from foreign competition curiously in engineering and construction, legal services, and bankingcreate risks and obstacles that few foreign companies are aware of until too late.Minimizing Legal Risk- Hence double-uern companies that plan to outsource manufacturing to China should be aware of these legal challenges. One way of preventing these issues is to have a strong network with the locals or to make sure that sensitive technology is not outsourced to China.Cultural Challenges China has evidenced thousands of years of history, culture and traditions. The way Chinese people behave today is the result of its historical transformations, which is very different from the transforma tions witnessed by western societies. Hence the modern day Chinese culture is very different from the cultures of the west. The cultural aspects of the Chinese are immensely reflected in the business world, for example, A CEO in the western world is normally looked upon as a consensus builder or as an individual who debates and discusses strategies with their employees and then executes the strategy, whereas in China the leader is looked upon as the sole decider and executor of strategies. There is a strict hierarchy in the Chinese business culture, which is very different from the business culture of some of the west countries. So to run a successful wholly owned outsourcing unit in China, the western businessmen need to understand and overcome these cultural challenges. Challenges in Scale and DemographicsChina is a vast country with a massive population, Western businesses are often at awe about China and look at that the 1.3 billion people could become a large customer base, bu t in reality China is a complex market. 850 million people in China live in the impoverished countryside their life is harsh, uncertain and poor.536 million people live in the urban areas out of which 247 million people are considered middle class and have an expendable income. The middle class earns over $5000 per head over the period of a year, but one must also consider the fact that the Chinese are the largest savers in the world unlike some western countries such as the US where the consumers have massive disbursement power and a culture that promotes spending. Hence for a western company to succeed they need to understand these Demographic differences.Challenges related to market behaviour The Chinese market is unique in many aspects, many western companies have tried to sell their product as-is in the Chinese market and failed miserably, and these are not some small unknown brands but large mega brands that have been successful for many decades and different markets. To be r ecognized as a brand in China, one need to market and advertise the Chinese way, marketing and branding in China should carry a strong Chinese Cultural partial to be successful in the mainland. Successful western companies such as Google and eBay have failed to become market leaders in China. The lesson learnt from the failure of these companies is that they did not understand the localization factor Therefore for the long run, western companies should Think Chinese but act western and sell the right product at the right price to be successful in the Chinese market.Economic instability & Trade policy Challenges China is the worlds second largest economy and is among the scurrying growing economies of the world. When western companies move to China they have to consider the economic stability of the country and prepare themselves for the various risks due to changes in fiscal policy, fiscal policy, trade policy and other macro economic factors. Chinas economy is mostly dependent o n exports from the manufacturing industry and foreign economists suggest that the yuan is undervalued by as much as 40%. Hence a Change in the Yuan can impact the profitability of the western business. Due to high economic growth there has been a strong demand for semi and highly skilled labour all over China. The labour be have steadily increased over the last 5 years and the government has increased the minimum wage level. This will impact operating cost in China and hence a western company planning to operate in China will have to factor in this risk. In summary western enterprises need to be aware of macroeconomic risks before they start their operations in China or face the possibility of failure.

Report on Inflation

EVOLUTION OF EXCHANGE RATE REGIME IMPACT ON MACRO ECONOMY OF BANGLADESH by Liza Fahmida A project make outmitted in partial fulfillment of the requirements for the degree of Professional Master in sticking and finance Examination Committee Dr. Sundar Venkatesh (Chairperson) Dr. Juthathip Jongwanich Dr. Yuosre Badir Nationality East Pakistani Previous Degree Master in Finance and pious platitudeing University of Dhaka Bangladesh Scholarship Donor Bangladesh till Asian Institute of Technology School of Management Thailand May 2012 ACKNOWLEDGEMENT The dissertation story entitled organic evolution Of flip come in Regime Impact On Macro Economy Of Bangladesh has been prep argond for the partial fulfillment of Professional master in Banking and Finance (PMBF) syllabus persuadeed by School of Management, AIT, Thailand. I would manage to offer my wholehearted gratitude and respect to a good number of people who offered encouragement, info and information, inspiration and assist ance during the syllabus of constructing this dissertation story.It would be difficult to prepare the paper and to present it in a lucid manner within stipulated time without the help of my guide teacher Dr. Sundar Venkatesh, Adjunct Faculty, School of Management, Asian Institute of Technology, Thailand. His intense care, constant support and meticulous supervision guided me through the process. I am indebted to Begum sultana Razia, General Manager, Monetary Policy part, Bangladesh Bank, whose sincere co-operation and valuable advice help me to prepare this paper.I would like to thank all of my colleagues and an separate(prenominal) employees of Foreign stand in Policy Department and Monetary Policy Department, Bangladesh Bank for their assistance in this regard. I would like to thank all of fellow course mates who contributed through their comments and suggestions to prepare the embrace in a comprehensive manner. ii ABSTRACT Bangladesh had dickens different throw localis e governments- a stubborn switch step ashes from January 1972-May 2003 and a be adrift swop govern regime since June 2003. laterwards adopting the rootless transpose measure regime Bangladesh experienced positive impacts on macro economic development.The variables of the macroeconomic factors pick out been considered as foreign reserve, workers absolutions and exportation proceeds to evaluate the impact of change over ordain over them in this paper. But the ongoing challenges for the body politic are the depreciating twist in local gold in a richlyly inflationary prudence. The objective of the paper is to evaluate the macroeconomic performance over the regimes and to analyze present bullion postal service of Bangladesh. iii Table of Content NO. 01 Title page Acknowledgement Abstract Table of contents discover of Figures List of Abbreviations Chapter-01 02 1. 1 Rationale 1. Scope 1. 3 Objectives of the study 1. 4 Methodology 1. 5 Limitations 1. 6 Organizatio n 02 Chapter-02 Literature Review 03 Introduction 3. 1 Factors Affecting mass meeting deem 3. 2 Performance of previous and ongoing FX-Regime in Bangladesh dictate of GDP 3. 2. 1 harvest-time Unde 3. 2. 2 Current unwrap remainder 3. 2. 3 fanfare space 3. 3 Justification of rudderless replace charge per unit 3. 4 The Transition from Fixed to Float 04 Chapter-04 Performance of vagabond Exchange set out dust On Macro Economy of Bangladesh 4. 1 The merchandise On Macro Economy of Bangladesh Situation 4. 2 Enhancement of Workers remit 4. Reserve Position 4. 4 The Growth Rate of GDP 13 14 14 15 7 8 8 8 9 10 10 Chapter-03 Exchange Rate Evolution in Bangladesh 7 Introduction 1 1 1 2 2 2 3 3 SECTION Page I ii iii iv V vi iv 4. 5 Relationship among variables 05 Chapter 5 Preset Exchange Rate Situation Preset Exchange Rate Situation 5. 1 Exchange Rate Movement 5. 2 Reasons for Currency derogation 5. 2. 1 heights pomposity 5. 2. 2 Low Foreign Direct Investment 5. 2. 3 han dle deficit Chapter 6 06 Recommendation and Conclusion 6. 1. Control Inflation 6. 2. centralize Trade Deficit 6. 3 Enhancing Foreign Direct Investment 6. 3 in force(p) Capital Market 6. Short Term Foreign Borrowings 6. 5 Effective Capital Market 6. 6 Derivatives Market 6. 7 Formation of Domestic FX Market 6. 8 Autonomy of the Central Bank 07 08 References Appendix Trade Deficit of Bangladesh Yearly Reserve Position Yearly information of Workers Remittance Yearly data of Inflation Yearly data of Export, Remittance, Reserve and Exchanger Rate periodic data of Remittance and Exchange Rat Regression Analysis FDI In Bangladesh 16 17 17 17 18 18 19 21 21 21 21 21 21 21 22 22 22 23 24 25 26 27 28 29 30 31 v LIST OF FIGURES TITLE 3. 4 3. 5 4. 1 4. 2 4. 3 4. 4 5. 1 5. 2 5. 3 5. Exchange Rate Movement immediately after inception of Floating Comparison of month end square Effective Exchange Rate The Export Volume in US$ The Workers Remittance The Foreign Reserve Position (REER) and Nomin al Exchange Bangladesh GDP Growth Rate Rate between 2003-2004. Exchange Rate Movement Figure Inflation Growth Rate of Foreign Direct Investment Trade Deficit of Bangladesh PAGE 11 11 13 14 15 16 17 18 19 20 vi LIST OF ABBREVIATIONS AD ADB BB FDI FPI FX FY GDP IMF LC Authorized Dealers Asian study Bank Bangladesh Bank Foreign Direct Investment Foreign Portfolio Investment Foreign Exchange Financial YearGross Domestic Product International Monetary Fund garner of Credit NEER OANDA REER USD Net Effective Exchange Rate Website of shift rates information. Real Effective Exchange Rate Us Dollar vii Chapter 1 INTRODUCTION At the preamble of the Bangladesh Bank order, 1972, it is stated that Whereas it is necessary to establish a central assert in Bangladesh to manage the pecuniary and credit body of Bangladesh with a view to stabilizing domestic monetary esteem and maintaining a competitive external par value of the Bangladesh Taka toward fostering harvest-feast and development of countrifieds productive resources in the national interest. To maintain a competitive external par value of the Bangladesh Taka, as per Foreign Exchange Regulation Act, 1947, Bangladesh Bank as a central cant of the farming, regulates the foreign exchange on behalf of the government 1. 1 Rationale Exchange rate indicates the global position of deli precise of the country. The countrys economic development is closely cerebrate with its foreign exchange system. Foreign exchange rate is a vital fraction for the countrys economic activities too. Bangladesh has been experienced the drift exchange rate regime since May 2003 and passed a number of Pons and cons in the overall economy.Due to the ut just about importance of the exchange rate in the economy, the study has been conducted in this area. 1. 2 Scope This paper covers the comparison of the fixed and be adrift exchange regime of Bangladesh. The key factor of this paper is the evaluation of the impact of exchange rate on the fundamental macroeconomic indicators of the economy. Three main fundamental factors hire been identified to evaluate their impact with exchange rate. Those are export, workers remittance and foreign exchange reserve. The empirical data of 2000 to 2012 has been used to ustify the whole thing. To get an idea about the Bangladeshs position, nigh neighboring countrys experience withal been compared here. 1. 2 Objectives of the study 1. To evaluate the exchange rate regimes in Bangladesh economy Fixed and Floating 2 To evaluate the planless arrangements performance in three macro economic variables Export, Workers Remittance and Foreign Reserve. 3 To understand the reason for cash depreciation 1 1. 4 Methodology To obtain the objectives of the study, secondary data bring forth collected.The sources of data are Bangladesh Bank, Board of Investment, Export Promotion government agency, Websites of IMF, ADB, OANDA and other link links. Statistical compend correlation has been calcu lated to understand the exchange rates significance on the economic variables of Export, Workers Remittance and Foreign Reserve . 1. 5. Limitations There were about limitations to conduct the study. Being, sensitive, sunrise(prenominal) one, problems were faced to relate with various components and linking with them. And for its very nature, primary data was not available.Since the exchange rate regime is a vast area, it was also intriguing to prepare this report within a limited time. 1. 6. Organization There are six chapters in this report. Chapter I is the introduction that divided into six sub sections. Literature Review is in Chapter 2. Exchange Rate Evaluation in Bangladesh has been covered in Chapter 3. Chapter 4 covers Performance of Floating Exchange Rate System On Macro Economy of Bangladesh. Present exchange rate situation is describing in Chapter 5. The close chapter covers recommendation and conclusion. 2Chapter 2 LITERATURE REVIEW The basic polity variables of co untry is foreign exchange rate that ensured change, business, long term funding, foreign direct investment, inflation, foreign exchange reserve, inward remittance etc. Various economists opined that the insurance constitution of the exchange rate system had a crucial impact on 1990s economic catastrophe. Nevertheless, it is yet to be proved either theoretically or empirically regarding the role of exchange rate on the indicators of macroeconomic variables. Whatever the case may be, different countries adopt different exchange rate policies.Bangladesh, the counseling of this paper, had a fixed exchange rate system in military position since January, 3 1972. After more than 31 stratums, the Central Bank of Bangladesh (Bangladesh Bank) changed it into a floating exchange rate system in June 2003. Bangladesh has been pursuing a floating exchange rate system since then. Dr. Mirza Azizul Islam, the former advisor, Ministry of Finance of the Caretaker Government of Bangladesh, prese nted a paper in January 2003, right before the shift from fixed to floating regime, explaining the overall performance of the fixed regime and the probable implications of the floating regime on Bangladesh economy.He suggested that the experiences of other countries in the region show that floating regime generates greater volatility in exchange rates and this sort of uncertainty is likely to affect adversely the overall trade and investment climate which is already afflicted by many unfavorable elements in Bangladesh (See Islam, 2003). Bangladesh pursued a fixed exchange rate regime upto 1979. After that, from 1979 to mid-2003, it followed a managed floating exchange rate system.Repeated depression of the home specie, for maintaining a unwavering real exchange rate as surface as keeping away from overvaluation of the local taka, were the prime factors for taking new system of the foreign exchange system. From May, 2003, Bangladesh took almost a new form _or_ system of governmen t kn witness as clean floating exchange rate policy by creating mounty convertible current account. But large(p) account convertibility is not yet done. The main reasons for all the policies that Bangladesh took were due to improve export situation, decrease import liability with the aim of improving balance of trade.The evidences in favor of the supra mentioned opinion stick been placed below. Islam( 2003) told that the regulators of the monetary policy decides the exchange rate policy of the country in order to obtain two basic goals. The low one is domestic target that covers preventing inflation rate of inflation, the growth of credit both in Government and Private directs, and also the growth in fluidness and M2. The second reason is external target which considers foreign exchange reserve hike, declining current account balance, prevent exchange rate volatility in the countrys nterbank foreign exchange merchandise as sanitary as balance the exchange rate flow with neig hboring countries like India, Bhutan, Sri Lanka, Pakistan etc. Hossain (2005) referreing Rahman and talk that Bangladesh took floating exchange rate system due to (i) global competitiveness (ii) improve export dimensions (iii) eliminate subsidy from export (iv) reduce import coerce (v) increase the substitutes products for export. Aziz (2003) showed that according to the statements of the finance ministers for 3 ast decades, the prime causes of devaluation of taka in our country (i) come near in export(ii) reduce import(iii) improve local young industries (iv) promote the inward remittances trough pursue wage earners, and (v) increase foreign exchange reserve. As per the Financial Sector Review(2006) of the central bank of the country, the major reasons of exchange rate policy covers (i) export promotion (ii) encourage inward remittances(iii) keeping the price level stable, and (iv) preserve a variable account situation externally.As a result, all the publications and write-ups establish illustrated both directly or indirectly the export-growth and import reduction as the key reasons of the exchange rate policy of the country. Prior to adopting floating exchange rate regime, Islam (2003) argued that the economic and institutional prerequisites of a floating exchange rate regime are not met in Bangladesh. Some recent studies have tried to explain the behavior of nominal exchange rates of Bangladesh after its transition to the floating rate regime.By doing a correlation outline, Rahman and Barua (2006) explore the possible exposition of the exchange rate movement. They found that there is a strong correlation (-0. 40) between depreciation and export-import gap as a share of reserves L/C openings for imports also have a positive correlation (0. 45) with volatility of the exchange rate, which implies that the high up the L/C openings the more volatile is the exchange rate.They cease that high seasonal demand for foreign notes because of increased impor t bills, systematic withdrawal of excess liquidity by Bangladesh Bank, relatively faster elaborateness of credit and higher interest rates on various national savings instruments are the reasons behind the interest rate hike in the money commercialise and depreciation of the nominal exchange rate. William Miles, 2006 discussed about the effect of exchange rate system (both fixed and floating) on the long term growth in the economy.The effect of fixed rate, pegged rate and floating rate has been discussed here briefly on the basis of several literature reviews and the finding is that fixed and intermediate regimes have a clear, significantly negative impact on growth (holds only for emerging trades not for industrial nations. ) In this paper, the author has given an approach to turn back if exchange rate regime itself truly extracts an independent effect on growth.Results here indicate that the effect of fixed exchange rates on growth in emerging grocery storeplaces is not dire ct, but rather contingent on the existence of macroeconomic imbalances and other distortions in place in the domestic economy. These results front to conform more closely with exchange rate theory, which posits mostly positive, and few negative channels for pegged currencies to impact growth over the long run. Asad Karim Khan, June 2009 examines whether the floating exchange rate regime has any impact on the value of Bangladesh taka i,e does it make any lose on the value of the gold.He shows that regime change has no statistically significant impact on the value of Bangladesh currency once foreign exchange reserve is incorporated in the regression model. Younus and Chowdhury (2006) made an attempt to try out Bangladeshs transition to floating regime and its impact on macroeconomic variables. They find that output growth in Bangladesh performed wellspring in the intermediate and floating exchange rate regimes. Inflation is lower in the intermediate regime despite higher money fu rnish and exchange rate depreciation. They also find that currency depreciation boosted export growth in the floating regime.Chowdhury and Siddique (2006) have analysed the exchange rate pass through to domestic inflation in Bangladesh. 4 The experiences of close to countries in the region which implemented major changes in their exchange rate regimes in recent years can provide useful lessons for Bangladesh. I have tried to focus the comparison among different economic indicators between Bangladesh and some of the South Asian Countries (Afghanistan, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka) all of which adopted independently floating exchange rate regimes.Trade and financial policy measures are very important for the countrys economy and out of that consideration, Bangladesh has taken a new exchange rate policy according to the obligations of IMF (article number VIII), as on 24th March,1994 introducing current account fully convertible. At the same time, Bangladesh was under pressure since it is the member of IMF. As a result, Bangladesh took floating exchange rate system in current account on 31st May, 2003. After that, IMF agreed Poverty Reduction and Growth facility (PRGF) for our country with a new exchange rate system i,e, floating exchange rate system.However, Younus et al (2006) showed that free floating exchange rate system can arrange the prevention of overvaluation of local currency as it might make the export unattractive in the international world as well as alternative items of importable goods became difficult to bit with import goods. He illustrated that the prime goal of free floating system of exchange rate is vatical to avoid the main misalignment of exchange rate, specially, to stop unpredictable appreciation of real rate of exchange that might affect the demand of the total export of the country.The illustrations also included the encouragement of the export situation and decline the shortfall of the current account, cont rol inflationary situation, and increase the position of inward remittances. Since the independence of the country, Bangladesh is following an alive(p) exchange rate system that has been replicated in the nominal exchange rate that were declared by the central bank of the country time to time. Islam (2003) stated 89 modifications in the exchange rate of Bangladesh currency with USdollar since 1983 and among them, 83 were depression.Aziz (2003) illustrated 41 depreciation in nine years (1991-2000). Younus et al (2006) showed that 130 times depreciation took place between 1972 to 2002 in Bangladesh Taka that also reduce balance of payment deficit. So, this paper, correctly identifies the exchange rate as the main important thing for economic changes of the country. After independence, Bangladesh fixed its Takas value with British Pound Sterling on 3rd 1972. Since 1972 to 1990 the Taka was overvalued. So there was a vast deficit in remnant of payment that hurt the economy badly.From 1990 the gap began to narrow down. The exchange rate regime worked quite well in terms of balance of payment, inflation, export and remittance. So there were some debate about incipience of this floating and criticism also rose about competence and preparation of Bangladesh Bank. But Bangladesh Bank performed well in managing the new born. But there is some volatility in the market in recent past. Bangladesh Bank, as a central bank of the country intervened wisely to curve the volatility and market became stable though Taka remains undervalued.The experiences of South East and South Asian countries showed that they had to intervene in the market for smooth moving. The experience supports the Mr. Kindleberger beliefs that market work well on the whole but occasionally will be overwhelmed and 5 need help from a lender of the last resort. (The Economist, July 19th 2003). So the regulator should be watchful about the markets behavior and intervene when postulate without hesitations. In the growing country these kind of intervention should be proactive rather than reactive.Naeem and Rasheed analyzed another important issue of whether stock prices and exchange rates are related or not has received considerable attention after the East Asian crises. They said that during the crises the countries affected saw turmoil in both currency and stock markets. If stock prices and exchange rates are related and the causation runs from exchange rates to stock prices then crises in the stock markets can be prevented by controlling the exchange rates. Moreover, developing countries can exploit such a link to attract/stimulate foreign portfolio investment in their own countries.Similarly, if the causation runs from stock prices to exchange rates then authorities can focus on domestic economic policies to stabilize the stock market. If the two markets/prices are related then investors can use this information to predict the behavior of one market using the information on other market. They also claimed that most of the empirical literature that has examined the stock prices-exchange rate relationship has focused on examining this relationship for the developed countries with very little attention on the developing countries.This paper will assess whether the exchange rate regime change indeed has created any significant impact on the economy of the nation as well as the comparative analysis with the neighboring countries situation. There are some potentialities as well as difficulties in market base system, so in this study there are some recommendations for the regulator and for the market players. To manage the floating exchange rate, full automation as well as enhancer is essential in banking sector. As the capital account of our economy is not convertible there is little scope of capital flight.If the inception of floating exchange rate is the beginning to liberalize capital account immediately that wont be a wise decision. 6 Chapter 3 Exchange Rate Evolution in Bangladesh Introduction The world economy experienced some sort of fixed and flexible exchange rate. Before 1875 there was Bimetalism of exchange rate and then the Gold Standard (1875-1914). During Interwar period (1914-1944) the classical Gold Standard broken down and in July 1944 representatives of 44 countries succeeded to establish the Bretton Woods system.Again the oil shock in the early 1970s and the dampen of demand broken down this system and world economy shifted to flexible exchange rate. Bangladesh has been experienced two major exchange rate regimes since the countrys Independence from 16th declination1971. A Fixed Exchange Rate Regime from 1972 to 1979 and a Floating Exchange Rate Regime since May 2003. Among the time frame from 1971 to 2003, there were different exchange rate arrangements in terms of the currency mechanism, like Pegged to Pound Sterling (? 1972-1979Pegged to a basket of major trading partners currencies(? as the intervening currencies)1 980-1982Pegged to a basket of major trading partners currencies(US$ as the intervening currencies)19831999Adjusted Pegged System2000-2003Floatig Exchange Rate System May 30, 2003Present. All the policies of exchange rate system Bangladesh implemented, with the objectives of accelerating exports, reducing import pressure and improve the balance of trade. After independence, Bangladesh fixed its Takas value with British Pound Sterling on 3rd 1972.Since 1972 to 1990 the Taka was overvalued. So there was a colossal deficit in Balance of payment that hurt the economy badly. From 1990 the gap began to narrow down. The exchange rate regime worked quite well in terms of balance of payment, inflation, export and remittance. 3. 1 Factors Affecting Exchange Rate Under Floating Exchange Rate Arrangements Exchange Rate is primarily determined by demand for foreign currency and Supply of foreign currency where demand and supply of foreign currency is also affected by some other sensitive factors .According to Jeff. Madura, (International Financial Management) theoretically demand for foreign currency is determined by several factors like, import payments, service payments which includes income payments, debt service payments, foreign investment (outward) and foreign investment (outward). The supply of foreign currency is composed of export Receipt, service receipts which includes income receipts, debt service receipts, foreign aid (inward) and foreign Investment (inward).Besides those some other factors affect the exchange rate movements. The factors are a)Purchasing Power para b)Interest rate parity c) Relative income differential d)Government Control e)Expectations etc. 7 3. 2 Performance of previous and current FX-Regime in Bangladesh To evaluate the performance of Bangladesh considering the two different exchange rate regimes, some data comparison have been made among three neighboring countries in South Asia. Those are India, Pakistan and Sri Lanka. 3. 2. Growth rate of GDP Comparing the percentage of growth rate with major neighboring Countries, the following table shows that Bangladesh was more or less in a confusable situation before the adoption of floating exchange rate regime. Since 2003 with the new floating exchange rate system, there is also a positive trend of the GDP growth rate except 2009-2010. The global recession affect the overall growth of the country at that time. Table 3. 1 Growth rate of GDP (% per year) Y Country Banglades h India Pakistan Sri Lanka 2001 5. 3 5. 8 1. 8 -1. 5 2002 4. 4 4. 0 3. 1 4. 0 2003 5. 3 8. 2 5. 1 5. 9 2004 5. 7 7. 4 5. 5 5. E 2005 A 2006 R 200 7 6. 4 9. 2 6. 8 6. 8 6. 0 6. 6 7. 6 9. 7 5. 8 5. 8 5. 5 7. 7 200 8 6. 2 6. 7 3. 7 6. 0 200 9 5. 7 8. 0 1. 2 3. 5 2010 5. 8 8. 6 4. 1 7. 6 2011 6. 3 8. 2 2. 5 8. 0 ascendent Asian Development Outlook-2004 and 2011, ADB 3. 2. 2 Current Account Balance In comparison to other major South Asian countries, the table no. -2 shows that Bangladeshs achievement in terms of containing current account balance is emend after the adoption of floating exchange rate regime (since 2003). It has done consistently better than some of the neighboring countries like Sri Lanka, Pakistan, and India in all recent years excepting 2005.Table No. 3. 2 Current Account Balance as Percentages of GDP Y 2003 0. 5 0. 7 5. 9 -2. 2 E 2004 0. 0 0. 3 3. 0 -3. 0 A 2006 1. 3 -1. 2 -3. 9 -5. 3 R 2007 1. 4 -1. 4 -4. 8 -4. 3 Country Banglades h India Pakistan Sri Lanka 1999 -1. 5 -1. 1 -3. 0 -3. 6 2000 -1. 1 -0. 8 -0. 4 -6. 4 2001 -2. 3 0. 2 0. 6 -1. 5 2002 0. 4 0. 8 4. 6 -1. 8 2005 -1. 5 0. 3 2. 1 -3. 5 2008 0. 9 -2. 4 -8. 5 -9. 5 2009 2010 2. 7 3. 7 -2. 8 -5. 7 -0. 5 -3. 0 -2. 2 -3. 8 2011 0. 2 -3. 5 -1. 7 -4. 0 fountain Asian Development Outlook-2011, ADB 8 3. 2. Inflation Situation Exchange rate regime and inflation are relevant because a change in the exchange rate is almost certain to cause a change in the domestic price of tradable and indirectly the price of non-tradab le also. The international competitiveness of the economy is badly eroded by inflation. It generally encourages capital flight, exacerbates income distribution, gives rise to inequities in income distribution and aggravates poverty. The relevant data are presented in the following table no. -3. Table 3. 3 Inflation in Bangladesh and Selected South Asian Countries Y 2002 200 3 2. 8 4. 4 3. 4 3. 5 10. 2 5. 3 3. 1 2. 6 E 200 4 4. 5. 0 4. 0 A 2005 5. 2 5. 0 6. 2 2006 7. 2 5. 2 7. 9 10. 0 R 200 7 7. 2 5. 0 7. 8 15. 8 Country Banglades h India Pakistan Sri Lanka 1999 8. 9 3. 3 5. 7 5. 9 2000 3. 4 7. 2 3. 6 1. 2 2001 1. 6 4. 7 4. 4 11. 0 200 8 9. 9 8. 7 12. 0 22. 6 200 9 6. 7 2. 1 20. 8 3. 4 2010 7. 3 9. 2 11. 7 5. 9 2011 8. 0 7. 8 16. 0 8. 0 Source Asian Development Outlook-2011, ADB It is video display that there is an increase trend of inflation since the adaptation of floating exchange rate regime. Data on inflation rates represent period average outs. Except for India, which reports the wholesale price index, inflation rates presented are based on consumer price indexes.The higher inflationary situation take place due oil and food price hike in the international market as well as several natural disaster like, Sidor, flood etc. 3. 3 Justification of Floating Exchange Rate From the above mentioned data analysis, it can be said the previous regime performed quite well in certain criteria. The major reasons behind the adoption of new exchange rate system is mainly the governments commitment to the liberalization of the countrys economy and to take the appropriate steps to create suitable surround of the economy for entering into capital account convertibility regime.Rather than this, there was IMFs conditionalities to enter into new floating exchange rate regime. 3. 4 The Transition from Fixed to Float To toy up the economic demand and to fulfill the IMF conditionality, on 29 May, 2003 Bangladesh Bank issued a circular stating- effective from 31st May, 2003, Ban gladesh Bank floated its exchange rate and followed a fully market based exchange rate for Taka. Under this arrangement, exchange rate is determined on the basis of demand and supply of the respective currencies.Immediately after the inception of floating exchange rate banks, economists, currency traders and businessmen have welcomed the deregulation of the exchange rate saying that 9 the countrys foreign trade and remittance would get a boast up due to it and it would make the currency market more efficient and effective. Since the introduction there is no unusual mug up of exchange rate till mid 2004. Most of the time Taka maintains appreciating position during this period and Bangladesh Bank show a tremendous performance managing the new born exchange rate system.During mid 2004, Taka faced significant volatility against USD and it continued up to August 2004. After that period, the volatility of exchange rate of Taka against USD eased but resulting to comprehended USD till mid January 2005. In recent times, Taka has depreciated significantly against USD in the inter-bank market. This has happened as because of price hike in oil price and scrap vessel in the international market created a surge on import settlements. Figure3. 4 Exchange Rate Movement immediately after inception of Floating Exchange Rate Movment 58. 7 58. 65 58. 6 58. 55 58. 5 58. 45 58. 4 58. 35 58. 3 58. 25 58. Exchange Rate TK/$ Jun-01 Jun-04 Jun-08 Jun-11 Jun-15 Jun-18 Jun-22 Jun-25 Jun-29 July-03 July-07 July-10 July-14 July-17 July-21 July-24 July-28 Banking days Source Bangladesh Bank Unpublished Data Behavior of Real Effective Exchange Rate (REER) and Nominal Exchange Rate REER is considered as a guiding FX-rate to the policy maker as well as the market participants and it also shows the international competitiveness of countries goods and services. The policy makers are always tried to keep the Nominal Exchange Rate near to the REER. Before 1990 Taka was overvalued (see table no-0 1,02 and 03. that distorted our international competitiveness and that was the causes of prolonged Balance of Payment crisis. Figure3. 5 Comparison of month end Real Effective Exchange Rate (REER) and Nominal Exchange Rate between 2003-2004. 10 July-31 62. 00 61. 00 60. 00 Behavior of REER and Nominal FX-Rate Rate TK/$ 59. 00 58. 00 57. 00 56. 00 55. 00 54. 00 REER-2003 53. 00 Nominal TK/$-2003 Jan Feb Mar Apr May Jun Jul Aug phratry Oct Nov Dec REER-2004 Nominal TK/$-2004 calendar months Source Bangladesh Bank Unpublished Data After 1990, Taka remained undervalued. The gap between Nominal Exchange Rate and REER were widened over the period.Before inception of floating exchange rate Taka was almost running on a free float for the last 12-15 month as rates were decided according to demand-supply situation and liquidity in market. Bangladesh Bank was also not virtually selling any dollar that time. This means the market has already factored in floating exchange rate. Moreover, before inception Bangladesh Bank took some measures for strengthening regulation, such as, keeping close observation of Authorized Dealers (ADs) daily activities especially on Open Position, gave pressure for reconciliation of NOSTRO account balance, encourage every bank to set up dealing room and ressurized to make payment in due time etc. So we can obviously say that way to the floating exchange rate was prepared. 11 Chapter 4 Performance of Floating Exchange Rate System On Macro Economy of Bangladesh Introduction of floating exchange rate was debatable issue and also there were some criticisms about the competence of Bangladesh Banks from some corner. But Bangladesh Bank performed a tremendous performance. There was no volatility no speculation in price and market behaves rationally. If we consider the market statistics, we find that macro economic variables have positive performances over the period of time.Three major variables have been considered for evaluating the impact of exchan ge rate with them. The variables are Export, Workers Remittances and Foreign reserve. 4. 1 The Export Situation The export trend from 1998 to 2011 shows an increasing trend. It is shown here that there is upward trend of export after 2003,i. e, after adopting the floating exchange rate regime, the export has a robust growth in the economy. Figure4. 1 The Export Volume in US$ Source Bangladesh Bank Quarterly, January-March 2011 During the global recession, the export trend of Bangladesh was not that much affected mostly for the RMG sector.In the FY 09 and FY 10, the export volume increased significantly. 4. 2 Enhancement of Workers Remittance The Inward remittances from Bangladeshi nationals working abroad remained strong in FY10 even in the face of global economic slowdown and continued to play an important role in strengthening the current account. Receipts on this sector increased by 13. 4 percent to USD 10987. 40 million in FY10 from USD 9689. 26 million in FY09. The underlying r eason was that Bangladesh Bank has simplified the approval policy of drawing arrangements between foreign exchange houses and domestic banks.As a result, 40 banks 12 have been allowed for establishing 885 drawing arrangements with 300 exchange houses all over the world for collecting remittances, (of which approximately 650 drawing arrangements with 250 exchange houses are operative now). Figure-4. 2 The Workers Remittance Source Bangladesh Bank Quarterly, January-March 2011 Considering the growth rate of workers remittances, it has been observed that the rate is quite higher after the free floating exchange rate regime that is 20. 52 % (2003-2010) than that of fixed exchange rate regime of Bangladesh which is calculated as 11. 9% (19932002). The increasing amount of workers remittance helps to balance the trade deficit in a prudent manner. 4. 3 Reserve Position The amount of foreign exchange reserve has been increased significantly over the last couple of years. During the FY 2003 to FY 2005, the trend was quite steady and flat. But, it has an upward trend after FY 2007. The main sources of foreign reserve are workers remittance, foreign loans and grants and exports. 13 Figure-4. 3 The Foreign Reserve Position distributor point Reserves($) 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 469. 6 2705 2930 3483. 8 5077. 2 6148. 8 7470. 9 10749. 7 10911. 6 Source Bangladesh Bank Quarterly, January-March 2011 After the inception of floating exchange rate regime, the foreign exchange reserve boosted up due to huge amount of workers remittance and increasing trend of export. 4. 4 The Growth Rate of GDP The GDP growth rate reaches upto 6. 7% during FY 11. From 1994 to 2010, the average growth rate of GDP was 5. 47% reaching at high of 6. 63% in June 2006. The record low rate was 4. 08% during June 2004. For the last couple of years the growth rate was 5% above and Bangladesh is onsidered as a developing country. Figure-4. 4 Bangladesh GDP Growth Rate Source Bangladesh Bureau of Statistics,2011 14 4. 5 The relationship among the variables The relationship between the exchange rate and three variables i,e, export, remittance and reserve reflects quite positive in correlation. The correlation has been computed considering the data from 2002-2011. Correlation Exchange Rate Export 0. 928315219 Remittance 0. 859373146 Reserve 0. 825444493 One regression analysis has been done with workers remittance and exchange rate.The purpose of the quantitative analysis is to identify if there is any relationship between exchange rate and workers remittance of Bangladesh. The monthly data of workers remittance from the financial year 2007-2008 to financial year 2011-2012 has been taken for the calculation. The regression model, exchange rate is independent variable and remittance is dependent variable. The regression model is Y=66. 15+. 010385 remittance The value of R square is . 37 which means that the regression mode l explains 37% variation in exchange rate. The coefficient is very low which is and P value is quite high that is 3. 74.So, the remittance does not show any significant impact on foreign exchange rate. 15 Chapter 5 Exchange Rate Situation 5. 1 Exchange Rate Movement In the recent Taka depreciates against US$ drastically Over the period, July 2010-January 2012, from Tk 70 to Tk 86 a depressing 23% fall down. Figure-5. 1 Exchange Rate Movement Source Website OANDA The sharp fall of taka against US dollar continues for last couple of months. US dollar has been weakening against many other strong currencies like Euro, SF, Yen and GBP but getting stronger against Bangladesh Taka. Exchange rate depreciation creates the economy in a challenging situation. invariable depreciating tendency higher the inflation rate that ultimately increase the trade deficit. The ongoing depreciation of Bangladeshi taka is becoming the challenge for the central bank as well as the Government. The increasing trend of the trade deficit (figure 7) also shows the possibility of the shortage of supply of the foreign currency i,e, US$ in the market. 5. 2 Reasons for Currency Depreciation The reasons behind the currency depreciation are influenced by economic fundamental, exchange rate regime and Trading rules. There is a slow trend of capital inflow in the country for the last couple of years.The main reasons for that are low tendency of foreign direct investment and increasing trend of trade deficit. 16 5. 2. 1 High Inflation Inflation is appearing as a major threat in the economy in the recent past. Inflation had a moderate trend upto 2003 within 6%. It started increasing from 2004 and got sharp rise in 2008-2009 and the increasing trend is still continuing. The main cause of high inflation in Bangladesh is oil and food price hike in abroad. Figure 5. 2 Inflation Source Monthly stinting Trend-Bangladesh Bank, January 2012 The high level of inflation in the economy leads to lower the value of local currency taka.To cover the deficit budget, Government borrowings from the Central Bank (BB) and overall money supply increased leads to high inflation in the market. 5. 2. 2 Low Foreign Direct Investment The growth rate of foreign direct investment is showing a declining trend. The data has been used from 1996 to 2011. After 1998 and so on, the trend started to decline sharply. It increased a little bit during 2004-2005 but again has a very declining trend. 17 Figure-5. 3 Growth Rate of Foreign Direct Investment Source Monthly economic Trend-Bangladesh Bank, January 2012 In the recent past, the FDI growth rate is bad low.So, proper steps are supposed to be taken by the government authority. 5. 2. 3 Trade Deficit Though the export volume has an increasing trend since the inception of floating exchange rate regime, there is huge amount of trade deficit with an increasing trend. 18 Figure 5. 4 Trade Deficit of Bangladesh Source Monthly frugal Trend-Bangladesh Bank , January 2012 The amount of import has been increased sharply after 2006-2007. The gap between export and import becomes huge during the last financial year 2010-2011. Due to huge import payment, government debt has increased significantly in the country and demand for foreign currency increased. 9 Chapter 6 Recommendations and Conclusion Considering the above mentioned discussions, some recommendations have been formulated in order to bring stability in the foreign exchange market in the short run and long run for the Government and Bangladesh Bank i,e, the central bank of the country. Those are discussing as follows 6. 1. Control Inflation Effective measures are needed to be taken by the central bank to control inflation by reducing money supply in the economy. The formulation of the tighten monetary policy by the central bank is an important factor for controlling inflation.But the deficit budget of the Government creates huge Government Debt and prolong inflationary atmosphere. The rela ted factors for reducing deficit budget 6. 2. Reduce Trade Deficit One of the important components to reduce the trade deficit is to enhance export volume of goods and services. Bangladesh is a import depended country. The main importable items are petroleum and food. Local industrialization is utmost important specially in the food sector (substitute food items production) and other marketable items to reduce huge liability of the Government. 6. 3 Enhancing Foreign DirectInvestment Sufficient inflow of foreign direct investment could enhance the capital inflow in the country for long term. Bangladesh Government has specific policy for inviting FDI. Ensuring good governance, Infrastructural development, Utility, political stability will help to promote more investment from abroad in the country. 6. 4 Short Term Foreign Borrowings Borrowings from abroad is another option for supplying liquidity in the market. But the problem of short-term borrowing is that the country may fall into Debt-trap due to be unable to pay the money on time.Once the foreign currency injects in the market, it is difficult to recollect form the market as well. The Central Bank of Philippines in early 1990 can be remembered here. Due to short-term borrowing to meet the local market demand, got huge foreign liability. Continuous losses eroded its capital base and made it bankrupt in 1993. It took 25 years to reestablish the new central bank in that country. So, Instead of foreign borrowings, Concessionary loans at a low interest rate from World Bank and ADB and other bilateral donors might be a better option to meet the ongoing gap in the market. . 5 Effective Capital Market The capital market development is utmost important in order to bring the steady situation in FX market. Ensuring enough flow of Foreign Portfolio Investment (FPI), good governance and security in the capital market is time demand. 6. 6 Derivatives Market Introduction of various derivative products as options, currency swap, interest cap, interest swap, futures, forwards etc, as well as ensuring huge portfolio investment might bring the positive impact in the exchange rate market. 20 6. Formation of Domestic FX Market A formal forex market forum should be created, with the participation of independent professional bodies and with representation from the dealers association, Bangladesh Bank and other relevant government officials. This forum would provide the logistic support and computer programme for the forex market. Ideally, this forum would develop a secured web-based market to which only the members or participating organizations would have access. From this website, all the logistic support required for completing the forex dealings among the members/participating organizations could be provided. 6. Autonomy of the Central Bank The autonomy of the central bank is desirable issue for the economy. The central bank should operate and perform independently with full automation. Conclusion This study shows that floating exchange rate regime has constructive effect on economic growth. The transition period from Fixed rate regime to Floating rate regime was quite smooth and stable. There is significant growth in the fundamental economic variables on the long path of the new exchange rate regime. The trend of export, workers remittances and foreign reserves have been analyzed and found considerable growth on these variables.Nevertheless, the ongoing exchange rate depreciation along with high inflation is becoming a challenging issue for the regulators and Government as well. The gap between demand and supply of foreign currency in the market is getting bigger in the high inflationary economy which lead continuous loses in the value of the local currency. The key reasons have been found for the currency depreciation are inflation, government debt, trade deficit, low FDI etc. The study recommended some issues for Governments and Centrals banks part. The regulation should be pr oactive rather than reactive.There are some potentialities in this new regime to reap this potentiality, Government as well as regulators should take effective steps. 21 REFERENCES Asian Development Bank. 2011. Asian Development Outlook 2010 Update. Asian Development Bank. 2006. Asian Development Outlook 2005, ADB Manila, Philippines. Asian Development Bank. Manila,Philippines. 2005. Asian Development Outlook 2005, ADB Asad Karim Khan Priyo, June 2009,Impact of the Exchange Rate Regime Change on the Value of Bangladesh Currency. Bangladesh Bank Annual Reports. 2010.Dhaka Bangladesh. Bangladesh Bank Monthly economic Trend. January 2012 Bangladesh Bank, Scheduled Bank Statistics. July-September 2011. Financial Sector Review, 2006, Bangladesh Bank. Hossain, Akter. 2002, Exchange Rate, Capital flows and International Trade. Hossain, M. A. , and Alauddin, M. , (Fall 2005), Trade Liberalization in Bangladesh The Process and Its Impact on Macro variables oddly Export Expansion, The Jour nal of Developing Areas, Volume 39, Issue 1, 127-150. Jeff. Madura, International Financial Management, 10th edition. Islam, Mirza A. 2003) Exchange Rate Policy of Bangladesh Not Floating Does Not sozzled Sinking, Keynote Paper presented at dialogue organized by Centre for Policy Dialogue, Bangladesh January 2, 2003. Nusrate Aziz . June 2008. The Role of Exchange Rate in Trade Balance Empirics from Bangladesh. The IMF, Annual Report 2010, Financial operations and transactions, The International Monetary Fund. Younus, S. and Chowdhury, M. I. , (celestial latitude 2006), An Analysis of Bangladeshs Transition to Flexible Exchange Rate Regime, Working Paper Series. 22 APPENDIX I Trade Deficit of Bangladesh Export Import Year (in million USD) (in million USD) 1994-95 3472. 5250. 6 1995-96 3882. 4 6237. 9 1996-97 4418. 3 6436. 8 1997-98 5161. 2 6768. 0 1998-99 5312. 8 7205. 4 1999-00 5752. 2 7536. 6 2000-01 6467. 3 8401. 5 2001-02 5986. 1 7686. 0 2002-03 6548. 4 8691. 8 2003-04 7603. 0 9812. 9 2004-05 8654. 5 11832. 1 2005-06 10526. 2 13271. 7 2006-07 12177. 9 15441. 0 2007-08 14110. 8 19481. 4 2008-09 15565. 2 20291. 4 2009-10 16204. 7 21388. 2 2010-11 22928. 2 32398. 4 Source Monthly Economic Trend-Bangladesh Bank , January 2012 Trade Deficit (in million USD) -1778. 1 -2355. 5 -2018. 5 -1606. 8 -1892. 6 -1784. 4 -1934. 2 -1699. 9 -2143. 4 -2209. 9 -3177. 6 -2745. 5 -3263. 1 -5370. -4726. 2 -5183. 5 -9470. 2 23 Yearly Reserve Position In million USD Reserves($) Period 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Source Monthly Economic TrendBangladesh Bank , January 2012 2469. 6 2705 2930 3483. 8 5077. 2 6148. 8 7470. 9 10749. 7 10911. 6 24 Yearly data of Workers Remittance Remittances Year/Month 2011-2012* 2010-2011 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 2004-2005 2003-2004 2002-2003 2001-2002 2000-2001 1999-2000 1998-1999 1997-1998 1996-1997 1995-1996 1994-1995 1993-1994 1992-1993 In million In million US dollar Taka Growth Rate 2117. 7 11650. 32 10987. 4 9689. 26 7914. 78 5998. 47 4802. 41 3848. 29 3371. 97 3061. 97 2501. 13 1882. 1 1949. 32 1705. 74 1525. 43 1475. 42 1217. 06 1197. 63 1088. 72 944. 57 157668. 7 829928. 9 760109. 59 666758. 5 542951. 4 412985. 29 322756. 8 236469. 7 198698 177288. 2 143770. 3 101700. 1 98070. 3 81977. 8 69346 63000. 4 49704 48144. 7 43549 36970. 4 Average Rate Growth 13. 39772078 22. 41982721 31. 94664639 24. 90541207 24. 79334977 14. 12586707 10. 12420109 22. 42346459 32. 8903884 -3. 448382 14. 28001923 11. 82027363 3. 389543316 21. 22820568 1. 622370849 10. 00349034 15. 2609 20. 51706112 11. 89409131Source Foreign Exchange Policy Department, Bangladesh Bank Bangladesh Bank Annual Report 2009-2010 Growth rate is self calculated 25 Yearly data of Inflation Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Point to Point 1. 66 3. 58 5. 03 5. 64 7. 35 7. 54 9. 2 10. 04 2. 25 8. 7 10. 17 11. 59 12 mo nths average 1. 94 2. 79 4. 38 5. 83 6. 48 7. 16 7. 2 9. 94 6. 66 7. 31 8. 8 10. 91 Source Monthly Economic Trend-Bangladesh Bank , January 2012 26 Yearly data of Export, Remittance, Reserve and Exchanger Rate (In million USD) Workers Year FX Rate Export Remittance in mil US$ (in mil US$) 62. 691 2501. 13 FY02 5985. 89 63. 2216 3061. 97 FY03 6548. 54 64. 0869 3371. 97 FY04 7602. 99 68. 0508 3848. 29 FY05 8654. 52 73. 9865 4802. 41 FY06 10526. 16 74. 1681 5998. 47 FY07 12177. 86 73. 4636 7914. 78 FY08 12685. 4 73. 8228 9689. 26 FY09 14170. 7 74. 5518 10987. 4 FY10 14763. 8 79. 1877 11650. 32 FY11 20313. 8 Source Monthly Economic Trend-Bangladesh Bank , January 2012 Reserve (in mil US$) 1582. 9 2469. 6 2705 2930 3483. 8 5077. 2 6148. 8 7470. 9 10749. 7 10911. 6 27 Monthly data of Remittance and Exchange Rate Year Month Remittance ( In million USD) Ex rate (average) Year Month Remittance ( In million USD) Ex rate (average) 007-08 2008-09 2009-10 July August September October November D ecember January February March April May June July August September October November December January February March April May June February March April May June July August September October November December January February March April May June 567. 11 470. 95 590. 67 559. 05 617. 39 635. 34 710. 74 689. 26 808. 72 781. 71 730. 26 753. 58 820. 71 721. 92 794. 18 648. 51 761. 38 758. 03 859 784. 47 885. 67 840. 99 895. 3 850. 5 784. 47 885. 67 840. 99 895. 3 850. 5 885. 38 935. 15 887. 57 900. 70 1050. 4 873. 86 952. 39 827. 96 956. 49 922. 16 903. 05 892. 15 73. 6518 73. 4389 73. 5663 73. 3004 73. 2946 73. 473 73. 4672 73. 4063 73. 2738 73. 4847 73. 2841 73. 3473 73. 38 73. 4947 73. 2884 73. 6468 73. 7971 73. 691 73. 7961 73. 8126 73. 8073 74. 1052 73. 9459 73. 9413 73. 8126 73. 8073 74. 1052 73. 9459 73. 9413 73. 9214 73. 6394 73. 7567 73. 7551 73. 5378 73. 8549 73. 8181 73. 9592 74. 2051 74. 0648 74. 4125 74. 6026 2010-11 2011-12 July August September October November December January February March April May June July August September October November December 57. 31 963. 92 837. 71 923. 85 998. 64 969. 10 970. 54 986. 97 1102. 98 1001. 97 998. 42 1038. 91 1015. 58 1101. 79 855. 44 1039. 48 908. 79 1147. 22 74. 5447 74. 4778 74. 5078 75. 0673 75. 3246 75. 5892 75. 8669 76. 0948 76. 8504 77. 8919 78. 42 78. 843 79. 6805 79. 534 79. 7888 80. 9414 81. 9104 84. 1857 28 Source Monthly Economic Trend-Bangladesh Bank , January 2012 Regression Analysis Exchange Rate and Remittance sum-up OUTPUT Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0. 610778 0. 373049 0. 360993 2. 020275 54ANOVA df Regression Residual Total 1 52 53 SS 126. 2866232 212. 2385435 338. 5251666 Standard Error 1. 622261594 0. 001867047 Lower 95. 0% 62. 90219774 0. 006638903 Upper 95. 0% 69. 41280968 0. 014131912 MS 126. 2866 4. 08151 F 30. 94114904 Significance F 9. 36275E-07 Coefficients Intercept X Variable 1 66. 1575 0. 010385 t Stat 40. 78103 5. 5 62477 P-value 3. 7402E-41 9. 36275E-07 Lower 95% 62. 90219774 0. 006638903 Upper 95% 69. 41280968 0. 014131912 2 FOREIGN DIRECT INVESTMENT (FDI) INFLOWS AND STOCKS BY COMPONENTS IN BANGLADESH (In million US$) Inflows Period 996-97 Jul-Dec Jan-Jun 1997-98 Jul-Dec Jan-Jun 1998-99 Jul-Dec Jan-Jun 1999-00 Jul-Dec Jan-Jun 2000-01 Jul-Dec Jan-Jun 2001-02 Jul-Dec Jan-Jun 2002-03 Jul-Dec Jan-Jun 2003-04 Jul-Dec Jan-Jun 2004-05 Jul-Dec Jan-Jun 2005-06 Jul-Dec Jan-Jun 2006-07 Jul-Dec Jan-Jun 2007-08 Jul-Dec Jan-Jun 2008-09 Jul-Dec Jan-Jun 2009-10 Jul-Dec Jan-Jun 2010-11 JulyDec. Jan-Jun Source Stocks Total 366. 85 157. 63 209. 22 603. 30 366. 07 237. 23 394. 10 339. 23 54. 87 383. 22 254. 25 128. 97 563. 92 449. 67 114. 26 393. 76 240. 21 153. 56 379. 18 174. 75 204. 43 284. 16 145. 82 138. 34 803. 78 322. 06 481. 72 744. 61 363. 54 381. 07 792. 4 411. 41 381. 33 768. 69 285. 03 483. 66 960. 59 602. 65 357. 94 913. 02 342. 22 570. 80 Equity Capital 136. 71 40. 79 95. 92 349. 02 236. 14 112. 88 195. 54 167. 63 27. 91 152. 98 109. 56 43. 42 372. 27 306. 76 65. 51 230. 11 168. 27 61. 84 163. 98 71. 97 92. 01 111. 23 64. 13 47. 10 361. 14 108. 79 252. 35 447. 22 173. 24 273. 98 464. 50 229. 67 234. 83 545. 69 166. 78 378. 91 535. 42 430. 34 105. 08 515. 14 113. 47 401. 67 Reinvested Earning 151. 27 79. 92 71. 35 181. 31 92. 10 89. 21 120. 71 100. 67 20. 04 80. 71 56. 19 24. 52 81. 00 53. 25 27. 75 84. 66 37. 26 47. 40 164. 97 69. 42 95. 55 161. 38 74. 58 86. 80 297. 1 152. 99 144. 12 198. 64 103. 36 95. 28 281. 00 169. 46 111. 54 197. 71 101. 70 96. 01 336. 61 149. 72 186. 89 331. 10 178. 05 153. 05 Intracompany Loans 78. 87 36. 92 41. 95 72. 97 37. 83 35. 14 77. 85 70. 93 6. 92 149. 53 88. 50 61. 03 110. 66 89. 66 21. 00 79. 00 34. 68 44. 32 50. 23 33. 36 16. 87 11. 55 7. 11 4. 44 145. 53 60. 28 85. 25 98. 75 86. 94 11. 81 47. 24 12. 28 34. 96 25. 29 16. 55 8. 74 88. 56 22. 59 65. 97 66. 78 50. 70 16. 08 Equity Capital 1010. 45 968. 83 1010. 45 1182. 07 1215. 54 1182. 07 1408. 98 1325. 97 1408. 98 1579. 15 1472. 70 1579. 15 1854. 10 1818. 86 1854. 10 2123. 50 1940. 7 2123. 50 2468. 63 2268. 39 2468. 63 2857. 96 2736. 50 2857. 96 3719. 99 3068. 07 3719. 99 3909. 60 3823. 32 3909. 60 5014. 96 4426. 69 5014. 96 Reinvested Earning 505. 89 492. 80 505. 89 470. 44 470. 37 470. 44 505. 13 494. 15 505. 13 637. 75 550. 10 637. 75 708. 43 649. 08 708. 43 880. 01 822. 04 880. 01 974. 18 904. 81 974. 18 1146. 22 1133. 87 1146. 22 873. 76 1109. 59 873. 76 903. 65 742. 04 903. 65 544. 21 474. 06 544. 21 Intracompany Loans 459. 04 428. 96 459. 04 454. 29 475. 85 454. 29 448. 82 382. 08 448. 82 410. 64 427. 89 410. 64 321. 16 408. 03 321. 16 362. 10 328. 7 362. 10 322. 72 363. 95 322. 72 364. 23 316. 86 364. 23 210. 68 221. 12 210. 68 325. 94 250. 66 325. 94 410. 29 378. 17 410. 29 Total 1975. 38 1890. 59 1975. 38 2106. 80 2161. 76 2106. 80 2362. 93 2202. 20 2362. 93 2627. 54 2450. 69 2627. 54 2883. 69 2875. 97 2883. 69 3365. 61 3090. 68 3365. 61 3765. 53 3537. 15 3765. 53 4368. 41 4187. 23 4368. 41 4804. 43 4398. 78 4804. 43 5139. 19 4816. 02 5139. 19 5969. 46 5278. 92 5969. 46 118. 31 211. 57 12. 64 131. 64 233. 62 71. 26 Statistics Department, Bangladesh Bank. 342. 52 436. 52 5196. 21 5143. 70 533. 65 612. 69 342. 21 462. 67 6072. 07 6219. 06 3

Distribution Channel of Banas Dairy Essay

The present study is conducted in the Banas Dairy sales area Genesis of Banas Dairy Late ShriGalbhabhai Patel established Banas Dairy with the dream of uplifting socio economic status of village farmers. This dream was fulfilled through the creation of a co-operative milk union for Banaskantha district, on the trail of Amul Dairy of Kaira district, the ideal model of a Co-operative. Consequently eight village level co-operative milk societies in Vadgam and Palanpur taluk Ire registered and started collecting and pouring milk at DudhSagar Dairy, Mehsana from 3rd October 1966.The milk union got registered under Co-operative act on 31st January 1969 as Banaskantha District Co-operative milk producers Union Limited, popularly known as Banas Dairy. The cosmos stone was laid by Late Galbabhai Nanjibhai Patel on 14th January 1971 at 122 acres land acquired near Jagana village in order to set up a dairy plant under the operation flood program launched by national Dairy development Board. On 7th May 1971 the dairy started functioning at the same place with a capacity of 1. 5 lakh liters of milk per day.This has now been increased to 24. 3 lakh liters per day. The dairy has threesome automated plants with a wide 8-9 product lines. The small dream of Shri Galbabhai has now taken the shape of a co-operative of 1350 societies with around 15000 members. With the relentless efforts of dedicated and committed leadership, the dairy has won the trust of milk producers of Banaskantha district and has brought about a happy change in the lives of all its members. It has come up as a major revolution in the upliftment of the residents of the district.Mission and Vision Banas District Cooperative Milk Producers Union Ltd. was established with the prime objective of eliminating the monopoly of private traders and providing the poor farmers the due that they deserve. along with this it also ensures that the farmers are benefited the maximum out of their operations and activities. The mission of the organization is to provide sustainable means of livelihood to socio-economically downtrodden rural mass, while treading on the pathway of progress. The organization renews its vision every ten years.It strives to be a successful world class co-operative dairy. The objectives of the organization are clearly expressed through the select policy, which states that I, the Banas Dairy, commit and aspire to fulfil the needs and expectations of our internal as Ill as external customers and delight them through our quality products and services. I shall achieve the polish through the followings a). Applying principles of Quality Management Systems and Food Safety Management for continuous enrichment of our management processes. ). Providing remunerating returns, quality input services, introducing innovative and appropriate schemes and services to our milk producers. c). need and providing and encouraging appropriate training for skill up-gradation of our employees. d) . Protecting our value system and the environment by judicious use of all natural resources. India is an agri- oriented bucolic of the world. 70% people are accompaniment in rural area so I can say Indian people are living in village the majority of population.The dream of late Galbabhai Patel, founder chairman and the selfless sage to uplift socio- economical status of village farmers came true after(prenominal) creation of a co- operative milk union for banaskantha district, on the foot print of Amul Dairyof kaira presently Anand) district on the model of true co operative milk societies in Vadgam and palanpur taluzka of district Ire registered and started collecting and pouring milk at Dudh Sagar dairy, Mahesana from 10th march 1969.

Achieving Strategic Fit

Strategic fit express the degree to which an organization is matching its resources and capabilities with the opportunities in the external environment. The matching takes place through dodging and it is therefore vital that the company have the actual resources and capabilities to execute and support the strategy. Strategic fit can be used actively to evaluate the period strategical situation of a company as well as opportunities as M&A and divestitures of organizational divisions.Strategic fit is related to the Resource-based view of the level which suggests that the key to meshingability is not only through positioning and industry selection but rather through an internal focus which seeks to utilize the unusual characteristics of the companys portfolio of resources and capabilities. 1 A unique combination of resources and capabilities can eventually be developed into a competitive advantage which the company can profit from. However, it is important to differentiate between resources and capabilities.Resources relate to the inputs to production owned by the company, whereas capabilities describe the accumulation of learning the company possesses. Resources can be classified both as tangible and intangible Tangible Financial (Cash, securities) Physical (Location, plant, machinery) Intangible Technology (Patents, copyrights) Human resources Reputation (Brands) Culture Several tools have been developed angiotensin converting enzyme can use in order to analyze the resources and capabilities of a company.These include SWOT, value chain analysis, cash flow analysis and more. Benchmarking with relevant peers is a useful tool to assess the relative strengths of the resources and capabilities of the company compared to its competitors. Strategic fit can also be used to evaluate specific opportunities like M&A opportunities. Strategic fit would in this case refer to how well the potential acquisition fits with the planned direction (strategy) of the acquiring company. In order to justify offset through M&A transactions the transaction should ield a better return than Organic growth. The Differential Efficiency Theory states that the acquiring debauched get out be able increase its efficiency in the areas where the acquired firm is superior. In addition the theory argues that M&A transactions give the acquiring firm the possibility of achieving positive synergy effects meaning that the two merged companies are worth more together than the sums of their parts individually. 2 This is because merging companies may adore from economics of scale and economics of scope.However, in reality many M&A transactions fails due to different factors, one of them being lack of strategic fit. A CEO survey conducted by Bain & Company showed that 94% of the interviewed CEOs considered the strategic fit to be vitally influential in the mastery or failure of an acquisition. 3 A proud degree of strategic fit from can potentially yield many benefits for an organization. Best case scenario a high degree of strategic fit may be the key to a successful merger, an efficient organization, synergy effects or cost reductions.

Gsci

DERIVATIVE CASES An Investment Linked to Commodity Futures Professor Richard Spurgin FIN 5310 1 Group 1 Zhongyi Qian Hao Cheng Yue Zhao Liuyang Gao Motivation for issuing the earnest Prior to the Swedish Export Credit Co. issued the security, the performance of the GSCI showed that this index was clearly winsome. First, the increasing-trend cumulative total begets were higher than the fall backs on S&P 500 and the treasury bonds, and then it became more diversified with more futures foreshortens introduced after 1980.Besides, another attractive feature of the GSCI was its ability to act as a hedge against inflation because it had a strong despotic correlation with the two most widely used measures of inflation CPI and PPI. In addition, the investment on the GSCI had the potential to decrease the peril of a portfolio because its fall ins were negatively cor think with returns on profligates and bonds. We could examine the index performance more specifically. The total retur ns on the GSCI consisted of three components, the yield from the indirect Treasury bill, the ghost return and the riffle yield from the futures.According to the total return of the GSCI front to 1990, we could find that the character of the T-bill yield was substantial and relatively stable while that of the spot return was small on average and extremely volatile and that of the roll yield was positive though somewhat volatile. The primary source of return changed based on different period with different fiscal environment and weighting strategy. Spot return contributed a lot in the inflationary period while the roll yield contributed more in the isinflationary period. As for the returns after 1991, we consider it reasonable to assume that the GSCI would continue to generate hefty returns. Since the prices of crude oil futures included in the GSCI had been in backwardation 80% to 85%, GSCI generated high roll yield that significantly contribute to the total return during 1981-1 990. Therefore, we can say that in 1991-1993, with substantial contribution of T-bill yield and relatively high roll yield, the total return of the GSCI would continue to be hefty in short term.As a consequence, the GSCI would get more attractive and hence popularizing securities exclusively tied to it such as notes issued by Swedish Export. In addition, it was true that GSCI was particularly attractive because it had negative correlation with the US stock market. From Exhibit 4, we can obviously find returns of GSCI had negative correlation (actually -0. 32) with returns of S&P 500 and in the meanwhile, generated relatively higher returns than those of S&P prior to 1991. As far as we concerned, it make a lot of sense since its a fully collateralized portfolio of commodity futures.As we know, in theory, commodities futures perform well when financial assets perform worse , that is to say, GSCI has a negative correlation with stock markets. Structure of the security It is possible to replicate the GSCI by making a portfolio, which contains the future contracts of the commodities that includes in the GSCI and the futures of each individual commodity can be weighed approximately the same percentage as they are in the current GSCI. When the future reaches to its maturity, the future contract will be rolled over into the next nearest contract just like the way the GSCI was calculated.In this way we can replicate the GSCI index and the return should be also approximately equal to it. As for the tradeoff between buying the structured note and the replicating portfolio, one should compare them in different aspects. Although the titulary return maybe theoretically the same, the actual return of the structured note should be higher than the replicating portfolio because the transaction tumbles and charges will be charged in the win of making and keeping the portfolio. To replicate the payoffs of the GSCI, the investor also needs to put a certain amount of money as th e frequent margin and/or collateral postings.Besides, if the investor wants to sell what he has for exchange, then he will find the liquidity for the structured note is much higher than the replicating portfolio. However, the investors would only get paid 95. 57% of the increase rate of GSCI index from the structure note while they did not have such limitation on the replicating portfolio. On this transaction, Goldman Sachs earned commission fee as 0. 35% of the total amount of the note, which was $350,000, but they got far more than this for creating the index. In addition to the notes described in this case, Goldman Sachs offered a number of other products related to the index.Each of these products would generate a huge amount of commission. For Swedish Export Corp. , they could finance with no fix interest paid and the possibility that the cost of financing was still cheaper than that of issuing company bond directly definitely existed. Investors would like to have this struct ure note in portfolios not only because the advantages illustrated above, but also because it had a negative correlation with the stock market, so it could hedge the portfolio risk to some extent. How the deal performed over timeTo calculate the total return, we first need to calculate the cash flows ( dining table 1) by using the formula, Par*0. 9557 *GSCI End / GSCI Begin, and when at maturity the value investors could redeem is $78781. 54. Thus the total return of security is as below (78781. 54/100000)(1/3)-1=-7. 64% 39390. 77/50000)(1/3)-1=7. 64% Compared with other alternatives such as Managed Futures Funds, Swap Transaction and CRB Futures Index, it seemed that GSCI was a good investment since all these three alternatives had relatively dismantle return than GSCI and still in the decreasing trend.However, the total return of GSCI was declining from 1991 to 1994. Besides, the T- bill yield was higher than the GSCI return, which made this investment meaningless. Additionally, we calculated the yearly return of GSCI and downloaded the return of S&P and Treasury of these four years. Correlations between GSCI return and S&P and Treasury return is showed in Table 2. It was obviously that there were positive correlation between the GSCI return and S&P and also positive between GSCI and Treasury, which meant that this future contract could not decrease risk effectively.Therefore, in recollection from 1991 to 1994, the GSCI futures contract decreased the overall return and at the same time failed to diversify the risk of the investment portfolio. It was not a good investment for investors. Table 1 Year Par=100000 Par=50000 11/1/91 95570. 00 47785. 00 11/30/94 78781. 54 39390. 77 Table 2 Year Return S&P Treasury 91 -5. 46% 30. 23% 5. 61% 92 -4. 09% 7. 49% 3. 41% 93 -8. 20% 9. 97% 2. 98% 94 -7. 64% 1. 33% 3. 99% S&P and return 0. 327556756 T and return 0. 302031481