The resistivity of Constantan Essay Example

The resistivity of Constantan Paper The resistance of a piece of wire is dependant on its length, cross-sectional area and the type of metal the wire is made of. The resistance of a given wire can be calculated using the following equation: R = ? L / A where: L = Length (m) A = cross-sectional area (mi ) ? = resistivity of the metal By rearranging the equation the resistivity of the metal can be calculated: ? = R A / L The resistivity differs depending on the metal however it is constant at room temperature for each metal. This means that two pieces of wire made of the same metal and at room temperature should give the same result when calculating resistivity regardless of its length and cross-sectional area. The following equation can be used to calculate the resistance of a wire: R = V / I where: V = volts I = amps R = resistance When rearranged it can be compared with the equation of a straight line graph: V = R I y = m x (where m = the gradient) This means a graph plotted with volts against amps, the gradient of the graph will equal the resistance of the wire and from this the resistivity can be calculated. We will write a custom essay sample on The resistivity of Constantan specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on The resistivity of Constantan specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on The resistivity of Constantan specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Constantan was chosen as unlike most metals, its resistivity does not change when the temperature is raised so the results will not be affected by the wire heating up. Method and apparatus Take two lengths of constantan wire, one 34 SWG (standard wire gage) and the second 30 SWG. Measure the diameter of each wire using a micrometer and then measure their lengths in metres. Set up the apparatus as shown in fig. 1 using the 30 SWG wire first and ensuring the power pack is on direct current. Using the rheostat alter the number of volts running through the circuit until approximately 3 amps is reached. Note the voltage and ensure the scale of volts used does not exceed this as the wire will get too hot. Use the rheostat to change the voltage to the first on your scale and note the amps. Repeat this until six readings have been taken. Set up the apparatus with the 34 SWG wire and repeat experiment. Plot a graph for each wire and calculate the resistivity of the constantan, both wires should give the same result. In the interest of safety all electrical appliances should be regularly checked. It is also important that the wire is not handled while in use in the experiment as it may heat up. To ensure little error the crocodile clips should be at the very end of the wire as the length is a factor in the calculation. If the wire curls onto itself and is touching at any point then this will affect the results as it will shorten the length of the wire the current must travel through. Apparatus: Ruler Voltmeter Micrometer Wires Rheostat Crocodile clips Power pack Amp meter Fig. 1 Results 30 SWG 34 SWG Volts i 0. 1 Amps i 0. 01 Volts i 0. 1 Amps i Discussion The resistivity of the two wires should have given the same result as they were both made from constantan, however the wires gave two different results. The 30 S. W. G. wire gave a result of 5. 49 x 10 ? m whereas the 34 S. W. G. wire gave a result of 4. 62 x 10 ? m. Although both wires gave a relatively close result to the expected value of 5. 49 x 10 ? m when tested, it does suggest some error was made. It was noted that all the experimenters present found they calculated a lower value for the 30 S. W. G. wire than that of the 34 S. W. G. wire. This may mean that the properties of the two wires differ slightly, perhaps because of a difference in the company that produced it or a different batch. The equipment used was limited as to how accurate the readings could be with the accuracy being i 0. 01 for the ammeter and only i 0. 1 for the voltmeter. This may have affected the results and could account for why the graph for the 34 S. W. G. wire did not form a straight line and so a line of best fit had to be drawn. The graph for the 30 S. W. G. did form a straight line as expected so perhaps there was less error in the testing on this wire. If the experiment was to be repeated, a more accurate voltmeter and ammeter should ideally be used. It may also be beneficial to use wires that come from the same batch and company to ensure this is not a factor affecting the results. Bibliography Kaye and Laby (1995) Physical and Chemical Constants 16th Ed : Longman Carol Slack Show preview only The above preview is unformatted text This student written piece of work is one of many that can be found in our GCSE Electricity and Magnetism section.

Changes to Medicaid Regulation 435.406 Analysis of The Benefits and Disadvantages and The Strengths and Weaknesses of this Legislation essays

Changes to Medicaid Regulation 435.406 Analysis of The Benefits and Disadvantages and The Strengths and Weaknesses of this Legislation essays On July 1st, 2006, federal legislation was passed reauthorizing Medicaid to require proof of citizenship, for those wishing coverage. Changes to Medicaid regulation 435.406 affect a variety of stakeholders. This exploratory paper will look at the changes to the regulation and how these changes affect legal immigrants, illegal immigrants, healthcare organizations, and the general public, both locally, here in the state of Massachusetts, and nationally. The social problem that this legislature was intended to address will be discussed, as well. The benefits and disadvantages, strengths and weaknesses, of this new legislation will be analyzed. What feasible strategies and interventions might improve the policys response to the needs of families being served or left out, by this change, will be explored. Those who benefit from this change, and those who are disadvantaged by it will be identified, as well as whose voice dominated on this particular issue of immigration reform, will be noted. Lastly, this paper will discuss who might support the policy recommendations and who might resist the implementation of these changes and strategies for improving effective and efficient implementation. Changes to Medicaid Regulation 435.406 On July 1st, 2006, federal legislation was passed reauthorizing Medicaid to require proof of citizenship, for those wishing coverage. Changes to Medicaid regulation 435.406 affect a variety of stakeholders. This exploratory paper will look at the changes to the regulation and how these changes affect legal immigrants, illegal immigrants, healthcare organizations, and the general public, both locally, here in the state of Massachusetts, and nationally. The social problem that this legislature was intended to address will be discussed, as well. The benefits and disadvantages, strengths and weaknesses, of this new legislation will be analyzed. What feasible strategies and interventions might impr...

Common Interview Questions for Teaching Jobs

Common Interview Questions for Teaching Jobs Before walking into any job interview, you should take some time to prepare a few answers to common interview questions. You may even want to write out your answers and practice saying them aloud so that they come naturally to you once youre sitting down for your interview. If youre interviewing for a teaching position, youll want to think specifically about what kinds of education-related questions might come up. At a Title I school, for example, you may be asked,  What do you know about Title I? If you practice answering these questions now, you wont stumble through them later. Basic Questions Expect to be asked a few basic questions about yourself no matter what position youre interviewing for. While some of these questions may seem simple, you still want to be prepared with thoughtful answers. Some common basic questions include: Tell me about yourself.Why are you interested in this position?What are your greatest strengths?What are your weaknesses?Where do you see yourself in five years? Experience Unless you are applying for an entry-level position, you will likely  be asked about your background and teaching experience. The interviewer will want to know how well you work with others and what kinds of environments you are most comfortable in. You may be asked some questions along these lines: What experience do you have using computers in the classroom?Are you a team player? If so, please give me an example of a time you worked well with others.What grade level would you be most comfortable teaching?What type of reading program did you use in  student teaching?Describe your  student teaching  successes and failures. Classroom Management An employer considering you for a teaching position will want to know how you handle yourself in the classroom and interact with students. Expect to be quizzed on classroom management strategies and other logistical issues. Questions may  include: If I walked into your classroom during reading time, what would I see?What methods do you use for classroom management? Describe a  difficult incident with a student and how you handled it.How would you handle difficult parents?Give me an example of a rule or procedure in your classroom.If you could design the ideal classroom for elementary students, what would it look like? Lesson Planning Once your interviewer is sure that you can keep a classroom under control, theyll want to know how you plan lessons and evaluate student learning. You may be asked any number of the following questions: Describe a good lesson and  explain why it was good.How would you go about  planning a lesson?How would you individualize a curriculum for students at various levels?How would you identify the special needs of particular students?What methods have you used or would you use to assess student learning? Philosophy of Learning Finally, your interviewer may want to know how you think about education more broadly, what you consider to be the qualities of a good teacher, what you know about different learning models,  etc. These types of questions may include: Tell me what you know about the Four Blocks  Literacy Model.What is your personal  educational philosophy?What are the most important qualifications for being a good teacher?What was the last educational book you read?

Fieldwork Research Paper Example | Topics and Well Written Essays - 1000 words

Fieldwork - Research Paper Example So in any case culture is based on the information which people create, offer, and consume. With Internet invention the necessity to transmit the information orally and in written form has disappeared, moreover the way of information storage has changed as well. All the information is kept on servers of the biggest global sites such as Google. This search engine along with other influential companies receive huge power as they can predict and even create tendencies knowing what information people look for (Komando, 2013). In order to outline how the global culture is developing Google has created zeitgeist videos which tell about the most frequent requests of its users. Culture is a dynamic notion, and thus those entities that possess the information and know how it is consumed can outline cultural shifts and tendencies. So following and tracing informational currents may help to understand what the phenomenon of digital zeitgeists say about our culture. Analyzing this videos and dis tinguishing dominant events, personalities, and emotions allows seeing global attributes of development. Reviewing five Google digital Zeitgeist videos helped to distinguish five trends that appeared in global cultural development. In 2009 Google launched the video in which all the main events of the world were typed as words of request. This choice is not accidental as the way of information transmission was always the way of power control in the world. In this zeitgeist video Google has concentrated on the personalities which create the world history. With the help of Google people learn who became significant, as Barack Obama being elected as the President of the USA or Hussein Bolt setting a new record in running. Moreover, fame spreads instantly so Google marks the à ©poque in which every person can receive global fame and power in a minute. On the one hand,

Synchronized Access to Shared Memory by Multiple Essay

Synchronized Access to Shared Memory by Multiple - Essay Example Various techniques which can be used to achieve this are discussed in the following paper. A multi-core processor (or chip-level multiprocessor, CMP) combines two or more independent cores (normally a CPU) into a single package composed of a single integrated circuit (IC). The below diagram "Dual CPU Core Chip" (Schmitz, 2004) gives an idea about it. The principle behind current Multi-Processing (MP) systems is that computations requiring large amount of CPU usage could be broken up into many relatively independent parts. These parts, called threads, while being executed simultaneously, could either be of the same or different process. Since these threads could be inter-dependant, issues of memory architecture and in particular memory consistency and cache behavior are 'key' to both correctness and performance in multi-processing systems. Multi-Core Processors (CMPs) could be broadly classified as Uniform Memory Access (UMA) processors in which all the CPUs are able to access all the memory with no specific preference or Non-Uniform Memory Access (NUMA) processors, where each CPU may have its own special memory area. A system may maintain memory consistency using hardware or using a combination of hardware and software techniques. Hardware can provide a particular memory ordering guarantee, (hardware will maintain the sequential nature of program memory accesses), while software can be used supplement hardware-provided memory ordering by forcing additional ordering restrictions at desired times. The memory ordering scheme implemented is a design choice involving a tradeoff between hardware complexity, software complexity, and the desired ability to cache and buffer data. Non-Uniform Memory Access (NUMA) Architecture Refer Diagram "NUMA Architecture." (Watson, n.d., p. 4) In NUMA architecture a processor can access its own local memory faster than non-local memory that is, memory local to another processor or memory shared between processors. In this type, all the MPs may or may not be of similar capacity (Asymmetric Multi Processing). Communication between processors is often based on use of shared memory between those processors. An 'Inter Process Interrupt' (IPI) allows CPUs to generate notifications to other CPUs to invalidate entries for a shared region or to request termination. Uniform Memory Access (UMA) Architecture Refer Diagram "UMA Architecture." (Watson, n.d., p. 3) When multiple processors can access the same shared memory, the MP system has to make sure that the ordering of memory access from one processor is made visible to the other processors. Memory Fencing One way to achieve 'Cache Coherence' in a MP environment would be by using 'Fencing' technique. Refer Diagram 'MFDA and MFDR Instruction" (Mittal, 1997, p. 26). In this technique, MP system (11) access and release of shared memory space (15) is done using two special instructions - MFDA and MFDR. The Memory Fence Directional - Acquire (MFDA) (16) instruction locks the specified area from being accessed by other processors. Once the operation is over and data can be released, the Memory Fence Directional - Release (MFDR) (17) instruction is issued. Since an MFDA instruction 'locks' the shared data until its

Categories of drivers Essay Example for Free

Categories of drivers Essay Since the start of road transportation, there have been drivers of the varied kind. The modes of transportation changed from horses or horse driven carts to cars but these set of drivers have always remained since then. Drivers of automobiles can be categorized into three categories teenage drivers, old drivers which mainly comprises of senior citizens and drunk or substance abusive drivers. The safety on the road of a person is basically depended on the kind of driving one does. A person’s skill to drive depends upon a certain set of factors due which he gets categorized. Teenage drivers who use automobiles are mostly adrenalin driven and have a habit of being impatient on roads. Teenagers with attitude problems can indulge in major road mishaps and can cause severe damage to themselves along with the innocent car drivers on the road. A teenager cultivates his driving skills by looking at his parents or guardians and later on the pressure of his per group plays a massive factor in driving. It has been estimated about sixty five percent of passengers have had fatal injuries due to the reckless driving of an immature teenager. The habit of risk taking or trying to create impressions on their peer groups more often than not result in deadly crashes. If apart from impulsive behavior, a teenager also does any kind of alcoholic or drug abuse, then the combination of impulsive behavior with substance abuse not only makes them dangerous on the road, but also they risk of having the worst kind of crashes possible on road. As we age our reflexes and our ability to make life saving maneuvers also go down. This is a problem with all the old aged drivers in the world. These old drivers in their experience have a perfect mentality to drive safe, but because of ageing lots of occurrences physically take place like loss of good vision, or their loss of their ability for quick response time. These drivers won’t commit mistakes on purpose and would have a thinking of driving at lower speeds with an intention of attaining maximum safety. How much ever these drivers have good intentions, any physical bustle can cause them to crash anytime which sometimes makes a risky commodity on the road. The worst kind of a driver however is a driver who abuses alcohol or any substance and then drives a set of wheels. These are the kind of drivers who irrespective of their age which can comprise from being a teenager to being a senior citizen have the ability to kill and get killed depending on the amount of alcohol or drug they have consumed. These drivers knowing that they are not in right condition risk everyone’s life around and are equivalent of a deadly weapon on the road, as it become highly unpredictable about when they would crash and cost someone their lives. The following evidence will show the risk taken by these drivers and the amount of crashes that can take place because of their carelessness: ‘Nearly half a million people are injured in alcohol-related crashes each year. More than 15,786 of them die. Thats one death every 33 minutes. In 2000 in Kansas, 2,469 people were injured in alcohol-related crashes. Thats more than six persons injured each day’ (Courtesy: Kansas Department of Transportation, â€Å"Types of drivers†. Retrieved on November 24, 2008 from http://www. ksdot. org/burTrafficSaf/sns/Presentation/types. asp) It can only be understood that a safe and a good driver should always maintain patience while driving, as a small move from any of the three categories discussed above can cause them their lives for no fault of their own. Reference: 1) Kansas Department of Transportation, â€Å"Types of drivers†. http://www. ksdot. org/burTrafficSaf/sns/Presentation/types. asp

Is the Tarnished Image of Northeastern Being Rebuilt? :: Journalism Journalistic Essays

Is the Tarnished Image of Northeastern Being Rebuilt? Boston - Northeastern University is expanding its campus and student body more and more every year. Just a few years ago it was just a small commuter school, now it is reaching close to the top 100 Colleges and University’s in the United States. The university’s enrollment is now up to over 20,000 students, both undergraduate and graduate students. Everything is not as peachy as it seems. Since 1990, Northeastern University has almost doubled its size. It used to be on just one side of the Orange Line. Now it goes all the way into Roxbury, Mission Hill, and Fenway. Residents in the area are a little angry that Northeastern University is coming into their neighborhood and pushing them around. â€Å"I haven’t liked what Northeastern has done ever since they came over the tracks,† said Randall Thomas, 51, a longtime resident of Roxbury. " In this neighborhood the rents are going up, the students are misbehaving, and the Northeastern police are hassling long time residents, instead of the students. They need discipline and Northeastern has to keep them in check,† said Thomas. Thomas talked about his years living in Roxbury, which is all 51 years of his life. He said the university has to work with the neighborhood. According to Thomas it is a long standing African-American Community that has its needs and the university should understand that and take that into consideration. According to city housing assessments, the price of real estate has doubled in some areas of Roxbury. The huge demand for property and the university’s growth has made the once poverty stricken area into a hot commodity for the university and real estate investors. One building in the neighborhood on Tremont was listed worth of $265, 500. Predictions for the end of the year 2004 have the estimated worth at about $394,000. That is a significant rise in one year. â€Å"Northeastern is taking over, their pushing the poor people out,† said Kenny Miller, 35, and a resident of Roxbury. â€Å"Roxbury residents fight to get their homes back, the damn condominiums they built, they’re taking over Mission Hill as well.† â€Å"The students are supposed to be our future leaders, they suck.† said Thomas, â€Å"Stop coming in our neighborhood, pushing us. Who do they think they are? Harvard or MIT?† On the contrary, Northeastern University feels that it is working with the neighborhoods to accomplish good for the community as a whole.

Report on Inflation

EVOLUTION OF EXCHANGE RATE REGIME: IMPACT ON MACRO ECONOMY OF BANGLADESH by Liza Fahmida A project submitted in partial fulfillment of the requirements for the degree of Professional Master in Banking and Finance Examination Committee: Dr. Sundar Venkatesh (Chairperson) Dr. Juthathip Jongwanich Dr. Yuosre Badir Nationality: Bangladeshi Previous Degree: Master in Finance and Banking University of Dhaka Bangladesh Scholarship Donor: Bangladesh Bank Asian Institute of Technology School of Management Thailand May 2012 ACKNOWLEDGEMENT The dissertation paper entitled â€Å"Evolution Of Exchange Rate Regime: Impact On Macro Economy Of Bangladesh† has been prepared for the partial fulfillment of Professional master in Banking and Finance (PMBF) program conducted by School of Management, AIT, Thailand. I would like to offer my wholehearted gratitude and respect to a good number of people who offered encouragement, data and information, inspiration and assistance during the course of co nstructing this dissertation paper.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 utmost care, constant support and meticulous supervision guided me through the process. I am indebted to Begum Sultana Razia, General Manager, Monetary Policy Department, 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 other employees of Foreign Exchange 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 report in a comprehensive manner. ii ABSTRACT Bangladesh had two different exchange rate regimes- a fixed exchange rate system from January 1972-Ma y 2003 and a floating exchange rate regime since June 2003. After adopting the floating exchange rate regime Bangladesh experienced positive impacts on macro economic development.The variables of the macroeconomic factors have been considered as foreign reserve, workers’ remittances and export proceeds to evaluate the impact of exchange rate over them in this paper. But the ongoing challenges for the country are the depreciating trend in local currency in a highly inflationary economy. The objective of the paper is to evaluate the macroeconomic performance over the regimes and to analyze present currency situation of Bangladesh. iii Table of Content NO. 01 Title page Acknowledgement Abstract Table of contents List 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 Organization 02 Chapter-02 Literature Review 03 Introduction 3. 1 Factors Affecting Exchange Rate 3. 2 Performance of previous and current FX-Regime in Bangladesh rate of GDP 3. 2. 1 Growth Unde 3. 2. 2 Current Account Balance 3. 2. 3 Inflation Situation 3. 3 Justification of Floating Exchange Rate 3. 4 The Transition from Fixed to Float 04 Chapter-04 Performance of Floating Exchange Rate System On Macro Economy of Bangladesh 4. 1 The Export On Macro Economy of Bangladesh Situation 4. 2 Enhancement of Workers Remittance 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 Depreciation 5. 2. 1 High Inflation 5. 2. 2 Low Foreign Direct Investment 5. 2. 3 Trade Deficit Chapter 6 06 Recommendation and Conclusion 6. 1. Control Inflation 6. 2. Reduce Trade Deficit 6. 3 Enhancing Foreign Direct Investment 6. 3 Effective 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 data of Workers Remittance Yearly data of Inflation Yearly data of Export, Remittance, Reserve and Exchanger Rate Monthly 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 Real Effective Exchange Rate The Export Volume in US$ The Workers Remittance The Foreign Reserve Position (REER) and Nominal 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 Development Bank Bangladesh Bank Foreign Direct Investment Foreign Portfolio Investment Foreign Exchange Financial YearGross Domestic Product International Monetary Fund Letter of Credit NEER OANDA REER USD Net Effective Exchange Rate Website of exchange 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 â€Å"Whereas it is necessary to establish a central bank in Bangladesh to manage the monetary and credit system of Bangladesh with a view to stabilizing domestic monetary value and maintaining a competitive external par value of the Bangladesh Taka toward fostering growth and development of country’s productive resources in the national interest. To maintain a competitive external par value of the Bangladesh Taka, as per Foreign Exchange Regulation Act, 1947, Bangl adesh Bank as a central bank of the country, regulates the foreign exchange on behalf of the government 1. 1 Rationale: Exchange rate indicates the global position of economy of the country. The country’s economic development is closely related with it’s foreign exchange system. Foreign exchange rate is a vital component for the country’s economic activities too. Bangladesh has been experienced the floating exchange rate regime since May 2003 and passed a number of Pons and cons in the overall economy.Due to the utmost 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 floating 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 have been identified to measure their impact with exchange rate. Those are export, worker s 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 Bangladesh’s position, some neighboring country’s experience also 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 floating arrangement's performance in three macro economic variables: Export, Workers Remittance and Foreign Reserve. 3 To understand the reason for currency depreciation 1 1. 4 Methodology To obtain the objectives of the study, secondary data have collected.The sources of data are Bangladesh Bank, Board of Investment, Export Promotion Bureau, Websites of IMF, ADB, OANDA and other related links. Statistical analysis correlation has been calculated to understand the exchange rate’s significance on the economic variables of Export, Workers Remittance and Foreign Reserve . 1. 5. Limitations There were some limit ations to conduct the study. Being, sensitive, new 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 challenging 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 last chapter covers recommendation and conclusion. 2Chapter 2 LITERATURE REVIEW The basic policy variables of country is foreign exchange rate that ensured trade, business, long term funding, foreign direct investment, inflation, foreign exchange reserve, inward remittance etc. Various economists opined that the policy of the exchange rate system had a crucial impact on 1990’s 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 focus of this paper, had a fixed exchange rate system in place since January, 3 1972. After more than 31 years, 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, presented 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 t hat 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 money, for maintaining a steady real exchange rate as well 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 policy known as ‘clean floating’ exchange rate policy by creating fully convertible current account. But capital account convertibility is not yet done. The main reasons for all the policies that Bangladesh took were due to improve export si tuation, decrease import liability with the aim of improving balance of trade.The evidences in favor of the above mentioned opinion have 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 first one is â€Å"domestic target† that covers preventing inflation rate of inflation, the growth of credit both in Government and Private levels, and also the growth in liquidity and M2. The second reason is â€Å"external target† which considers foreign exchange reserve hike, declining current account balance, prevent exchange rate volatility in the country’s nterbank foreign exchange market as well as balance the exchange rate flow with neighboring countries like India, Bhutan, Sri Lanka, Pakistan etc. Hossain (2005) referreing Rahman and Bayes that Bangladesh took floating exchange rate system due to: (i) global competitiveness; (ii) improve export dimension s ;(iii) eliminate subsidy from export; (iv) reduce import pressure; (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) rise in export;(ii) reduce import;(iii) improve local newborn industries; (iv) promote the inward remittances trough pursue wage earners, and (v) increase foreign exchange reserve. As per the â€Å"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 have 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, Isla m (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 analysis, Rahman and Barua (2006) explore the possible explanation 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 higher the L/C openings the more volatile is the exchange rate.They conclude that high seasonal demand for foreign currency because of increased import bills, systematic withdrawal of excess liquidity by Bangladesh Bank, relatively faster expansion of credit and higher interest rates on various national savings instruments are the reasons behind the int erest rate hike in the money market 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 markets not for industrial nations. ) In this paper, the author has given an approach to determine 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 markets is not direct, but rather contingent on the existence of macroeconomic imbalances and other distortions in place in the domestic economy. These results seem to conform more closely with exchange rate theory, which posits mostly positive, and fe w 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 currency.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 analyse Bangladesh's transition to floating regime and its impact on macroeconomic variables. They find that output growth in Bangladesh performed well in the intermediate and floating exchange rate regimes. Inflation is lower in the intermediate regime despite higher money supply 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 Th e experiences of some 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 country’s 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 supposed 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, control inflationary situation, and increase the position of inward remittances. Since the independence of the country, Bangladesh is following an dynamic exchange rate system that has been replicated in the nominal exchange rate that were de clared 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 Taka’s value with British Pound Sterling on 3rd 1972. Since 1972 to 1990 the Taka was overvalued. So there was a huge 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. 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 prudently 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 â€Å"market work well on the whole† but occasionally â€Å"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 market’s behavior and intervene when needed without hesitations. In the developing country these kind of intervention should be proactive rather than reactive.Naeem and Rasheed analyzed another important issue of whether stock prices and exchange rat es 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 develo ped 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 based 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 transparency 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 won’t 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 th en 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 country’s Independence from 16th December1971. 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 (? :1972-1979;Pegged to a basket of major trading partners’ currencies(? as the intervening currencies):1980-1982;Pegged to a basket of major trading partners’ currencies(US$ as the intervening currencies):19831999;Adjusted Pegged System:2 000-2003;Floatig 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 Taka’s value with British Pound Sterling on 3rd 1972.Since 1972 to 1990 the Taka was overvalued. So there was a huge 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 parity; 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 Bangla desh was more or less in a similar 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 Source: 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 Bangladesh's achievement in terms of containing current account balance is better after the adoption of floating exchange rate regime (since 2003). It has d one 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 Source: 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-tradable also. The international competitiveness of the economy is badly eroded by inflation. It generally encourages capital fligh t, 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 showing that there is an increasing trend of inflation since the adaptation of floating exchange rate regime. Data on inflation rates represent period averages. Except for India, which reports the wholesale price index, inflation rates presented are based on consumer price indexes.The higher inflationary situation take plac e 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 government’s commitment to the liberalization of the country’s economy and to take the appropriate steps to create suitable environment of the economy for entering into capital account convertibility regime.Rather than this, there was IMF's ‘conditionalities' to enter into new floating exchange rate regime. 3. 4 The Transition from Fixed to Float: To meet 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, Bangladesh 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 country's 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 raise 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 appreciated USD till mid January 2005. In recent times, Taka has depreciated significantly against USD in the inter-bank m arket. 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-01,02 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/$-2003 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec REER-2004 Nominal TK/$-2004 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, keep ing close observation of Authorized Dealer’s (AD’s) 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 Bank's 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 exchange rate with them. The variables are Export, Workers Re mittances 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. Figure:4. 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 reason 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 Period 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 model explains 37% variation in exchange rate. T he 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.Continuous 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 (figur e: 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 Economic Trend-Bangladesh Bank, January 2012 The high level of inflation in the economy leads to lower the value of local currency taka.To co ver 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 severely 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 Economic Trend-Bangladesh Bank , January 2012 The amount o f 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 related 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 exportable 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 â€Å"Debt-tr ap† 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 it’s 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 platform 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: Th is 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 Government’s and Central’s bank’s part. The regulation should be proactive 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 Variabl es Particularly Export Expansion, The Journal of Developing Areas, Volume 39, Issue 1, 127-150. Jeff. Madura, International Financial Management, 10th edition. Islam, Mirza A. 2003): â€Å"Exchange Rate Policy of Bangladesh – Not Floating Does Not Mean 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. , (December 2006), An Analysis of Bangladesh’s 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. 3 840 1. 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($) Period 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Source: Monthly Economic TrendBangladesh Bank , January 2012 2469. 6 2705 2930 3483. 8 5077. 2 6148. 8 7470. 9 10749. 7 10911. 6 24 Yearly data of Workers Remittance: Remittances Year/Month 2011-2012* 2010-2011 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 2004-2005 2003-2004 2002-2003 2001-2002 2000-2001 1999-2000 1998-1999 1997-1998 199 6-1997 1995-1996 1994-1995 1993-1994 1992-1993 In million In million US dollar Taka Growth Rate 2117. 7 11650. 32 10987. 4 9689. 26 7914. 78 5998. 47 4802. 41 3848. 29 3371. 97 3061. 97 2501. 13 1882. 1 1949. 32 1705. 74 1525. 43 1475. 42 1217. 06 1197. 63 1088. 72 944. 57 157668. 7 829928. 9 760109. 59 666758. 5 542951. 4 412985. 29 322756. 8 236469. 7 198698 177288. 2 143770. 3 101700. 1 98070. 3 81977. 8 69346 63000. 4 49704 48144. 7 43549 36970. 4 Average Rate Growth 13. 39772078 22. 41982721 31. 94664639 24. 90541207 24. 79334977 14. 12586707 10. 12420109 22. 42346459 32. 8903884 -3. 448382 14. 28001923 11. 82027363 3. 389543316 21. 22820568 1. 622370849 10. 00349034 15. 2609 20. 51706112 11. 89409131Source : Foreign Exchange Policy Department, Bangladesh Bank Bangladesh Bank Annual Report 2009-2010 Growth rate is self calculated 25 Yearly data of Inflation Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Point to Point 1. 66 3. 58 5. 03 5. 64 7. 35 7. 54 9. 2 10. 04 2. 25 8. 7 10. 17 11. 59 12 months average 1. 94 2. 79 4. 38 5. 83 6. 48 7. 16 7. 2 9. 94 6. 66 7. 31 8. 8 10. 91 Source: Monthly Economic Trend-Bangladesh Bank , January 2012 26 Yearly data of Export, Remittance, Reserve and Exchanger Rate (In million USD) Workers Year FX Rate Export Remittance in mil US$ (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 December 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 SUMMARY 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. 562477 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. 7 0 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

Explain the Decision Making Process with Example of Your Own

EXPLAIN THE DECISION MAKING PROCESS WITH EXAMPLE OF YOUR OWN. Introduction:- Decision making is an integral part of the most of the top manager's duties. Not even a single day passes without taking decisions particularly in modern organisations. Hence, management and decision ­ making are considered as inseparable. In fact, whatever a manager does, he can do it only by taking some decision. All matters related to planning, organization, staffing, directing and controlling are engrossed in decision making process. That is why it is aptly pointed out that management is essentially a decision-making process.The survival and future success of any enterprise is directly related to the ability to take timely and appropriate decision by the executives. Thus decision-making is said to be the heart of management. Lot of planning exercise is to be initiated by the manager before taking any viable decision. The manager has to carefully plan and decide what to do or what not to do. Wrong decis ions quite often are proved to be either costly or futile. To prevent such losses, decision-making process remains to be the core are in all planned activities of the modern corporations. The selection from among alternatives of a course of action†, according to this definition, picking one course of action among alternatives available is termed as decision-making as per Koontz and Weinrich. In the words of George Terry,†decision-making is the selection of a particular course of action, based on some criteria, from two or more possible alternatives. † We can define this concept also as the process of choosing between various alternatives for achieving a specified goal. Every decision must take into consideration needs and future uncertainties.As per Herbert Simon there are three major steps in the decision making process. Decision making is about choosing from several options or ideas and taking action to generate a particular result. It is usually considered to be a rational and logical thinking process. J>Recognition and understanding of the problem. J>Various alternatives may be developed. J>careful assessment of alternatives available for taking a better decisions. Characteristics J>Decision making is a continuous process. J>The question of decision-making process must always be rational when there are alternatives.J>A decision-making process must always be rational and purposeful. J>Decision making is an intellectual process supported by good reasoning and sound judgment. J>Decision making is all pervasive in the sense that all levels of managers need to take decisions of varied nature. J>Decision-making is always related to future only. Troes of Decisions: Managerial decision may be classified into two categories, the first category includes the typical, routine and unimportant decisions and the second category covers most important, vital and strategic decisions.Apart from decisions are taken at different levels for meeting different p roblems. Oraanisational Vs Personnel Decisions:- As explained by Chester. I. Bernard, the decisions taken by the manager in his official capacity are termed as Organisational decisions. These decisions have a direct bearing on the functioning of the firm. Decision relating to reward systems or transfer of workers can be cited as examples under this category. In contrast to this, some times, decisions may be taken by the manager in his individual capacity and such decisions are termed as personal decisions.They may partly affect the personal life and partly affect the organization. Example,decision to quit the organization comes under this category. Routine Vs Strategic Decision:- Routine decisions involve little risk and uncertainty. Hence, they do not call for extraordinary judgement and thinking. They are mostly related day-to-day conduct of the business and taken repetitively. That's why they are normally taken at lower levels of management. On the other hand strategic decisions are taken by the top level management. Either they are concerned with policy matters or with long-term commitments of the organization.They require thorough understanding, analysis and best judgement, pertaining to location of the plant, type of technology and channel of distribution are the best examples of this type. Policy Vs Operating Decisions:- Policy acts as guidelines for future action. Hence,decisions pertaining to policies are usually taken by the top management. They are considered to be very important since they affect the total organization. While operating decisions are administrative in character, they help in translating policies into action.Decisions relating to a new incentive scheme may be termed as a policy decision. Decisions relating to the methodology of implementation of such incentive scheme are termed as operating decisions. Programmed Vs Non-Programmed decisions:- Programmed decisions usually deals with routine and repetitive problems. For dealing such pro blems, systematic policies, procedures and rules are established. Programmed decisions can be taken with little ease as everything goes according to some set of rules. But Non-Programmed decisions cover mainly unexpected events and challenges.In other words, each problem is unique in nature. For dealing with such special problems, executives usually refer them to the top management, tackling such situations , the manager needs expertise,intuition and creative thinking. Individual Vs Group decisions:- Decisions taken by the individual in his personal capacity are known as individual decisions. Organisations which are small in size can accommodate this type of decision-making process. When organizations grow in size and stature, complex problems do come into picture.Group decisions are considered to be the best under such situations. Group decisions represent the thinking of more than one executive. The various steps involved in the decision-making process are as explained below:- Ste p 1 – Defining the oroblem The first step is to define the real problem, money and efforts are going to be wasted if the problem is not determined correctly. That' s why, accurate diagnosis of the real problem is necessary to find out right solution. We should look at the real causes and for the remedial measures by knowing the inner details of the problem.Knowing only the outer surface of the problem and arriving at decisions may lead to fallacious conclusions. SteP 2- AnalYSing the Problem Once the problem is clearly defined, then, it must be analysed in the light of data pertaining to various factors that surmount the decision. Every situation may have some advantages and limitations. Necessary steps should be laid on locating the limitations and obstacles in achieving the desired result. Necessary care should be exercised in avoiding personalized bias in judging the certain factors. Analysis of crucial factors provides a sound basis for making effective decisions.Step 3- Developing alternatives The analysis of the problem becomes complete once it throws light on several alternative solutions. In fact, the success of decision-making process depends upon the ability of an executive in developing alternative solutions to a given problem. This requires lot of imagination, experience and judgement. Exploring the positive or negative impact of such alternatives forms as a solid base for sound decisions. Step 4- Evaluating alternative Once the alternatives are developed , the next step is to evaluate them in terms of their cause, time , impact and objectives etc.Many a time, either marginal cost or cost-benefit analysis is used to bring out the tangible benefits of each of such alternatives. Each alternative solution may have its own merits and de-merits. They should be compared with other alternatives for the purpose of appraising the real impact. As per Mr. Peter F Drucker, the important criteria for evaluating the consequences of different alternatives are risk,economy, time and limitations. Steo 5- Selecting the best possible solution Selection usually involves choice making. It is the last step in decision-making process.The manager has to select such an alternative course of action which can make the maximum contribution to the goal. It is not always possible to select the best alternative for a given problem. That is why the manger has to rely upon such course of action which can yield good results under a given set of circumstances and limitations. Step 6- Imolementing the decision Once the best alternative is selected, it must be implemented. This step mainly deals with the execution of the decision taken. It involves development of step by step plans, selling the idea to sub-ordinates and seeking co-operation from the needy people.At this stage, the decision is converted into action. The decision must be implemented in the right time and that too in a proper way. Step 7- Evaluation of Decisions The last step in decision-mak ing process is evaluation. The actual results of the decision should be compared with the expected results in order to locate the reasons for deviations. This review is a continuous process and it generates information for necessary feedback for further improving the decision-making process in future. Rationality in decision-making Rationality refers to objective and intelligent action.A decision is said to be rational if appropriate means are chosen to accomplish desired objectives. It implies that decision-maker tries to maximize the values in a given situation by choosing the most suitable course of action. A good decision depends on the makers being consciously aware of the factors that set the stage for the decision. Obtaining complete rationality is not always possible. That is the reason why people prefer to take satisfactory decisions instead of ideal or optimum decisions. Managers are not always confronted by the problem of rationality in decision-making.In practice, they c onfine themselves to few important alternatives which have limited risks combined with favourable consequences. Limits of Rational Decision making Managers are not always rational in their decision-making. They cannot always abide by the demands of rationality in decision-making process. There are some limitations to that and of which are as explained below. Since decisions are related to future, Managers cannot foresee all the consequences accurately. Moreover, lack of complete knowledge about the problem also makes it impossible to choose a good decision.Due to time and cost constraints, all complex variables that have a bearing on decision cannot be examined fully. Hence, the decision maker is forced to strike a balance between complete rationality and hard realities on the ground. The impact of all the variables cannot be ascertained because some of them are intangible. The consequences of various alternatives cannot be anticipated accurately. Hence, decisions taken under uncert ainty cannot guarantee the success of decision-making process. The Human factors like value systems, perceptions, social factors, institution etc. are the main limits on rational decision-making. Managers, being human beings, are greatly influenced by their personal beliefs, attitudes and biases. Because of this, the capacity of a decision-making process varies from individual to individual and from situation to situation. Every manger is vitally concerned with the above limitations in his approach to rational decision-making. He has to collect all the relevant information and try to overcome the above limits on rationality and choose the most rational decision for solving any given problem. Ba†iers of Effective Decision MakingApart from the above limitations, decision-making process remains to be ineffective because of the existence of various barriers in organization structure. These barriers impede the process of identification of problems. It's analysis and the development of the solutions. The following are the important barriers that can block managerial effectiveness in choosing the most suitable decision as per Elbing. The tendency of a human-being to evaluate a given problem with pre-conceived notions, act as a stumbling block in understanding the real situation.Though it's dangerous, managers feel safer if they do not change what is familiar. Eventually, the ineffective decision of a familiar way becomes accepted rather than considering new and innovative means. Many managers fail to demarcate the symptoms from the main problem. Many mangers have a tendency to respond to the problem instantaneously without proper infonmation and thinking. If they gather more infonnation, they become rather than what is unique in new problem. The above problems are mainly responsible for either indecision or for half decision in the modern organizations.Knowledge of the above problems will surely help the managers in arriving at pragmatic decisions. The followin g suggestions can be offered to overcome the above barriers so as to make the managers more effective in decision-making process. Avoid premature evaluation. Initiate impartial probing by avoiding personal biases on the outcome. Develop a sound system that can supply adequate information for making decisions. Encourage group leaders to respond to a given situation and compare the pros and cons of the solutions offered by the two groups for making an effective decision.Encourage innovative thinking among the sub-ordinates so as to identify the crux of the problem without waste of time and money. When decisions of critical and pivotal in nature are to be taken, encourage group thinking. For this, the problem is to be presented to the sub-ordinates first and they are asked to develop as many solutions as possible in a free environment. Techniques of Decision -making Brainstorming:- Brainstorming is the oldest and widely followed technique for encouraging creative thinking. It was origi nally developed by A. F. Osbom. It involves the use of a group.This is an approach to improve problem discovery and solving by encouraging sub-ordinates to give their ideas and solutions in a free environment, they will generate creative ideas. Continuous interaction through free discussions may result in spontaneous and creative thinking. The larger the number of solutions , the fairer are the chances in locating an acceptable solution. The research proves that on hour brainstorming system is likely to generate 50 – 150 ideas. It is interesting to note that while most of them are proved to be impracticable, at least, some of them merit serious consideration.This group process is not without limitations. It continues lot of time and therefore,is an expensive exercise. Secondly,it emphasises only quantity of solutions which more often than not proved to be superficial. By overcoming the above limitations, a modern manager can use this an an effective tool. Some of the claimed advantages of the brainstorming technique include:-  » It reduces dependence on a single authority figure.  » It encourages the open sharing of ideas.  » It stimulates participation among group members. It provides individual safety in a competitive group.  » It maximizes output for a short period of time.  » It ensure a non evaluative climate.  » It tends to be enjoyable and stimulating. Synetics- When compared to Brainstorming, synectics is a new concept developed by William J. J. Gorden. The terms ‘Synectics' is derived from a Greek word which refers to â€Å"Fitting together of diverse elements†. It starts on the premise that this concept encourages novel thinking for the development of alternatives through putting together different ideas which are distinct from each other.A given problem is presented to a group of people with different backgrounds and varied experience. It is the responsibility of the group leader to present the problem and lead the di scussions in order to stimulate creative solutions. This approach ensures on the spot evaluation of members suggestions. The leader who is a technical expert is always assisting the group in evaluating the feasibility of their ideas. But experience shows that synectics has been less widely used than â€Å"Brainstorming†. When the problem is real tough and challenging, this approach is used for effective decision-making.Like Brainstorming it also suffers from the same range of limitations. The synectic techniwue includes the following steps:- Problem statement and background information stage:- The group leader describes the general area of discussion but avoids identifying the specific problem . Creative thinking on the problem is encouraged. The leader presents background information on the problem and the goals associated with the idea solutions. Good wishing stage:- Group members are encouraged to wish for anything that comes to mind that could address the problem.As in br ainstorming, in this â€Å"freewheeling stage† people are encouraged to generate wild ideas and to hitchhike. Exploring ideas and not evaluating them are of utmost importance at this stages. Excursion stage:- Paricipants are asked to forget about the specific problem. They are asked to generate ideas about a somewhat unrelated are that eventually might be related to the problem at hand. Forced-fit stage. Participants take ideas from the excursion stage and force them to fit the initial problem. Although this often appears quite unusual and obtuse, it is intended to encourage creativity.In fact,evidence suggests that many great thinkers develop ideas from such experimental thinking. Intemized response stage:- The group picks one of the ideas generated during the forced fit stage and pursues it further. The idea is dissected on only its positive aspects are identified. After all the positive aspects have been explored,the idea's limitations are addressed. This focus on the posi tive is intended to encourage productivity and creativity. The outcome of the synectic process is a single unique plan or decision that has undergone considerable evaluation.The process tends to produce innovative ideas. Synectic approach can be quite useful for creative planning and decision making. Its cost is high. Furthermore, it produces only one potential solution to a problem. If that solution turns out to be unusable,the problem remains, and the process has failed. The Nominal Group: The nominal group consists of people knowledgeable on the issue to be decided who are in the same physical location and who are aware of each other but who do not directly interact while they are working together.The specific techniques for using the nominal group in decision-making vary with the situation, but usually the following steps are involved. l> The manger brings the group together and outlines the problem. l>Each member of the group generates a number of ideas in writing. l>Each membe r then presents a single idea at a time to the entire group. The ideas are written on a blackboard or on large pieces of paper, and discussion of them is limited to clarification. When no further ideas merge, or when the manager feels the process has gone far enough, each member votes on the ideas, again in writing.The final decision is summed outcome of the individual votes, but the manager is free to accept or reject it. Ooerations Research:- The Origin and development of operations research is attributed to military operations and applications in 2†³Ã¢â‚¬  world war. The war put tremendous pressure on the use of available scarce resources for various strategic and tactical operations. The success of operations research in developing options of effective and efficient nature was instrumental in making this approach rather dependable in decision making process.Now-a-days, greater emphasis has been laid on the use of mathematical models to reflect different options and constra ints in a situation and their effect on a selected goal. This quantitative approach to decision-making is usually referred as â€Å"Operations Research†. Of late, it has become an invaluable tool in the kit of a decision-maker. Operations Research employs optimizing models like Linear Programming, Project Management,Inventory Control, Decision Theory and Waiting Line Theory.Operations Research is the systematic method of studying the basic structure, functions and relationships of an organization as an open system. It always adopts a systems approach to management in getting things done. It is constantly interested in developing optimal solution with limited resources in a given situation. It covers six steps in its approach to problem solving. They are: a. Identification of a problem. b. Construction of a mathematical model to investigate the problem. c. Developing a good solution. d. Testing of the model in the light, the data available. e.Identifying and setting up of cont rol points. f. Implementation of the option as a solution to a critical problem, putting a solution to work. In essence, Operations Research attempts to develop the best solution that will contribute to organizational goals. Limitations of Operation Research:- Operations Research technique is not †¢ panacea to all the problems of modern management. In other words, it is not the end. Since Operations Research does not take intangible aspects into consideration, subjective judgement becomes difficult under this model.As the Operations Research technique directly depends upon the use of mathematical and statistical tools,it is increasingly becoming complex and costly exercise. Since decision making is a human process,It cannot be predicted properly. At the same time, the impact of such factors cannot be measurable. Delphi Technique:- It is a technique normally used for forecasting future events. It is a group decision making technique. Under this method, independent opinions are s ought from the members repeatedly so as to develop a best solution to a given problem.The success of Delphi technique depends upon a simple technique of understanding the problem from the other man's perspective. This ensures success. Though it is a useful technique, since it involves time and cost,it can not be tried in all situations. At the operations level hundreds of de(isions are made in order to achieve local outcomes that contribute to the achievement of a company's overall strategic goal. However, all these decisions are interrelated and must be coordinated for the purpose of attaining the overall company goals. Many decisions-making situations occur under conditions of uncertainty.For example, the demand for a product may not be 100 units next week but may vary between 0 and 200 units, depending on the state of the market, which is uncertain. Decision analysis is a set of quantitative decision-making techniques to aid the decision maker in dealing with a decision situation in which there is uncertainty. However, the usefulness of decision analysis for decision making is also a beneficial topic to study because it reflects a structured, systematic approach to decision making that many decision makers follow intuitively without ever consciously thinking about it.Decision analysis represents not only a collection of decision-making techniques but also an analysis of logic underlying decision making. The general process of the Delphi technique follows: A panel of people who are knowledgeable about a particular problem is selected. The members of the group never actually meet. The panel can have members both inside and outside the organization, and the individual members may or may not know who the other members are. A questionnaire about the problem to be solved is sent to each members of the panel. Each person is asked to make anonymous suggestions.These suggestions are pooled, and a feedback report is developed. The feedback report and a more advanced, second stage questionnaire are sent back to the panel members. Each panel member independently evaluates the feedback report, votes on the priority of the ideas contained in it, and generates new ideas based on it. The process is repeated until a consensus is reached or until the manager feels that sufficient information has been received to make a decision. A final summary feedback report is developed and set back to the group members. A major advantage of the Delphi approach is its anonymity.In groups that interact face-to-face, one person may dominate, or everyone may watch the manager for clues to what is wanted. Further is interacting groups and individual may take a stand and not want to back down for fear of losing face. Frequently experts are more concerned with defending their position than with reaching a good decision. Electronic meetings: The most recent approach to group decision making blends the nominal group technique with sophisticated computer technology. It's cal led the electronic meeting. The major advantages of electronic meetings are anonymity, honestly and speed.Participants can anonymously type any message they want and it flashes on the screen for all to see at the push of a participant's board key. It also allows people to be brutally honest without penalty. And it's fast because chitchat is eliminated, discussions don't digress and many participants can â€Å"talk† at once without stepping on one another's toes. Experts claim that electronic meetings are as much as fifty five percent faster than traditional face to face meetings. Phelps Dodge Mining for instance, used the approach to cut its annual planning meeting from several days down to twelve hours.Yet there are drawbacks to this technique. Those who can type fast can outshine those who are verbally eloquent but lousy typists, those with the best ideas don't get credit for them, and the process lacks the information richness of face to face-to-face oral communication. Bu t although this technology is currently in its infancy, the future of group decision making is very likely to include extensive use of electronic meetings. Decision making without probabilities:- A decision making situation includes several components, the decision themselves and events that may occur in the future, known as states of nature.Future states of nature may be high or low demand for a product or good or bad economic conditions. At the time a decision is made, the decision maker is uncertain which state of nature will occur in the future and has no control over these states of nature. When the probabilities can be assigned to the occurrence of states of nature in the future, the situation is referred to as â€Å"decision making under risk†. When probabilities cannot be assigned to the occurrence of future events, the situation is called â€Å"decision making under uncertainty†.Each decision will result in an outcome or payoff, for each state of nature that w ill occur in the future. Payoffs are typically expressed in terms of profit, revenues, or cost. For example, if decision 1 is to expand a production facility and state of nature a is good economic conditions, payoff la could b e $100,000 in profit. Once the decision situation has been organized into a payoff table, several criteria are available to reflect how the decision maker arrives at a decision, including maximax, maximin, minimax regret, Hurwicz, and equal likelyhood.These criteria reflect different degrees of decision-maker conservatism or liberalism. On occasion they result in the same decision; however, they often yield different results. Different decision criteria often result in a mix of decisions. The criteria used and the resulting decisions depend on the decision maker. For example, the extremely optimistic decision maker might disregard the preceding results and make the decision to maintain the status quo, because the maximax criterion reflects his or her personal decision-making philosophy.