Economics in the Engine, Finance is the Lubricant
This write-up of mine is mainly directed towards people who want to pursue higher studies in the fields of economics and finance. In this writing, I will try to establish how economics, finance, and mathematics are interrelated, and why one who wish to pursue higher studies in economics or/and finance needs solid knowledge of both these fields along with mathematics. Motivation of this writing has risen in my mind mainly because in as a student in North South University, I have seen how students are being misdirected when choosing their fields of specialization in undergraduate studies. Students who wish to do major in finance, chooses marketing, HR or International business as the additional major not economics or mathematics. Because, Most of the students have a misconception that finance and economics are not related, they are separate field. In addition, they are also not aware of the importance of mathematics in both the fields. I hope my this little effort will direct them the write path. I myself is not a established man in the fields of finance and economics, but I wish to pursue higher studies in economics and finance. My undergrad majors were economics and finance and minor equivalent in mathematics. And I believe, I have done considerable investigations by searching different websites and talking to different experts about what one needs to have when they want to pursue higher studies. I wish to share those things with you so that the perspective students in these fields become beneficial and they are not being misdirected.
The basic idea of finance centers on the theory of time value of money and risk and return. Theory of finance consists of several wings they are corporate finance, investment theory and futures and options (derivatives). All of these wings require strong foundation of time value of money and risk and return. And these two pillars that is time value of money needs extensive knowledge of mathematics and economics. Time value of money uses extensive mathematics when it comes to masters or PhD level studies as I have found out from different books/ notes of masters and PhD level and by talking to experts. Those advance time value money models abundantly uses advanced differential and integral calculus, different types of function (exponential, hyperbolic, trigonometric etc), advanced liner algebra (matrix, advanced vector fields) and econometrics. As at the advanced level, as the time value problems become complex it ought to use complex mathematical model, simulation models to solve the issues.
The risk and return concept is mainly derived from microeconomics of risk and return. The model mainly used here in the Capital Asset Pricing Model, wich was introduced by Jack Treynor, William Sharpe, John Lintner and Jan Mossin independently, building on the earlier work of Harry Markowitz on diversification and modern portfolio theory. Sharpe received the Nobel Memorial Prize in Economics (jointly with Markowitz and Merton Miller) for this contribution to the field of financial economics. To understand the model one should have solid background of microeconomic theory, to be specific indifference curve, preference theory, utility theories etc. And these theories are the heart of microeconomics or to be more accurate heart of any economic theory. Again, to understand microeconomics, one should have ample knowledge of mathematical tools, which included real analysis, advanced integral and differential calculus, advanced linear algebra, differential equations and a branch of economics that is econometrics.
The applied area of finance are corporate finance, investment theory areas namely – International finance and derivatives. All of these areas again uses extensively macroeconomics. As one understands when a investment analyst calculate price of the securities he/she has to forecast the economy before hand. And forecasting the economy requires understanding of macroeconomics very well. That is macroeconomic theory of Aggregate demand / Supply models, theory of money, theory of business cycles etc. More importantly, someone who has sound knowledge of these may sometime face difficulties in predicting the economy. So, how can one who do not have knowledge of these will predict the economic events. Yet again, macroeconomics comprehensively uses mathematical tools like differential equation, real analysis and higher order liner algebra.
Futures, options and derivatives finance is as well a highly mathematical field uses advanced mathematical and statistical models which is eminent from the MS and PhD level books in finance.
I have gone through websites of North American Universities that offer Phd in Finance, and have seen that in their first year they have to study micro, macro and econometrics and sit for the comprehensive exam like PhD Economics students. In addition, for entrance in to the PhD program they prefer and require who has solid mathematics background. The coursework for the first year is same for both PhD in economics and finance students. It again indicates that both the fields are so much related. As an economists said – “If Economics is the Engine, then consider Finance as the Lubricant”.
So, here by I conclude and want to again reinforce that those who want to pursue higher studies in the field of finance, do study rigorously mathematics and economics. These two are the bases of finance. And people who want to study economics, learning mathematics is a must.
Thank You
Mezbah Uddin
Involvement of Army in Bangladesh Politics
The journey starts from 1/11/07 when some of the so called “patriot” members of Bangladesh Army realizes that enough of corruption and now they need to rescue the country free from corruption and establish a fruitful and peaceful nation as people always expected. People of this country became overwhelmed with delight ness since they were worn-out of watching the conflict of the two main political parties, one with “logi-boitha” and other with premeditated changes in the government posts and discovering backdoor ways by which they can again secure their power. The process started first by declaring emergency and later forming a caretaker government with the emergency rule being applied, leaded by Dr. Fakhruddin Ahmed, former Bangladesh Bank Governor and a renowned economist. However, as the initiative started by the army, though the interim government seemed to be run by Dr. Fakhruddin, sooner it became realized by everybody it is actually being dictated by our Army chief Gen. Moin U Ahmed. The army led interim government started its “jihad against corruption” by arresting major MP’s and ministers of the previous BNP government and establishing a “special judicial court” to bring these corrupted people in to justice. Almost all of their arrests including that of Tareque Rahman, Khaleda Zia and Sheikh Hasina were applauded by people as people certainly knew that they were involved in corruption. Moreover, government has assured people that they will hold general election at the end of this year and the country will be back to democracy.
After carefully observing the events, reading various newspaper articles and by blending my judgments in to it, I have derived various conclusions about the current caretaker government. As I said, current government is at the first hand applauded by all the people because they knew that these politicians were involved in corruption. People want these politicians to be punished so that they never ever think of betraying with the nation. However, their judicial process has come to halt and many of them are being released without any accusations. Why ?- because they tried “ to correct the wrong things in the wrong way”, and the wrong were – forming special judicial court under the emergency rule and weak cases backed up by fragile evidence. Special judicial court became a problem because lawyers were not very much sure how to deal the cases and the case formation itself had many leakages. These politicians could have been brought to justice using our conventional laws, and if that procedure would have followed, cases were strong then these people would have been behind the jail bars.
In addition, their whole idea of running the country with few advisors in the place of 300 MP’s were totally erroneous which obviously can be proved by their coordination failure in operating the country in various conditions where people wanted their affirmative action. Those conditions include price hike, vandalism in the RMG sector and overall mismanagement of the economy which has led to liquidity crisis in the banks, and stagnation of the economy. These things were not desired by the people, people wanted very much from them but in return their bad management has caused misery for the people which is reflected by poor gdp growth of 5.3 %.
Moreover, as the interim government is backed up by army, many international institutions have raised concern of army taking over power and running the country for some more years. If that happens it will ruin the country’s economy, corruption will increase further given a dictatorship regime. We have witnessed army rule for several times, and have a very bitter experience of that. The experience is also eminent in the current regime, as it is being leaded by army officials in various important positions. We have to remember that a country’s defense is not made to run the country, they are not trained for it, their job is protecting the country not to run it. It is the politicians who will rule the country and most desirably in the democratic process. Above all it is the democracy that should be prevailed, promoted not dictatorship. Because, no where in the world dictatorship and more importantly army has done well in ruling the country.
I strongly believe the current government is responsible for not bringing the politicians in to justice, they should answer the 15 cr people why they have failed to do that. They should also answer why they have carried out experiments that have caused misery to the people. But they are not bothered to answer as they are a dictatorial regime, but history will not spare them, they will always be indicated as a “model of failure”. I want the army to be back in their barracks, hold general election as quickly as possible and want to say them – enough of your service , thank you , now please spare us !!.
Bangladesh’s Trade Deficit with India: Causes, Barriers and Future Perspectives under SAFTA
The study focuses on the historical trade deficit of Bangladesh with India. It tries to identify the reasons for the imbalance in trade and the obstacles that are hindering its exports to India. Bangladesh’s trade deficit with India is increasing exponentially in recent years. Bangladesh and India are both members of South Asian Preferential Trading Arrangement (SAPTA). However, in the course of time Bangladesh’s tariff liberalization policy has been faster and smoother compared to India which has been very slow in terms of liberalization policy. Moreover, other obstacles such as non-tariff barriers are hindering Bangladesh’s export to India where as Bangladesh is one of the major importers of India in the world. Thus, if Bangladesh can’t improve the situation now, the country will merely become a market for Indian products, trade status will worsen and country will not be able to exploit the window of opportunities arising from the regional integration SAFTA. Hence the study will provide readers the answers as to why Bangladesh is facing trade deficit focusing on the barriers that the country face, especially the non-tariff barriers which Bangladeshi exporters mostly complain about and discuss the future perspective of some industries and their potentiality under SAFTA.
full document is available Bangladesh’s Trade Deficit with India: Causes, Barriers and Future Perspectives under SAFTA
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