Islamic Monetary Economics: Insights from the Literature

This chapter reviews critical early literature of Islamic monetary economics. The prohibition of Riba has imposed challenges on Islamic economists to come up with the viable alternatives to achieve Islamic monetary policy goals. Our extensive review of theoretical and empirical literature indicates that equity based profit- and loss-sharing instruments have been proposed for conducting open market operations in an interest-free economy. Theoretically, the central bank can achieve desired goals by controlling money supply and profit-sharing ratios. The findings from empirical literature suggest that money demand tend to be more stable in an interest-free economy. Whether monetary transmission works through Islamic banking channel is controversial, but the literature is growing. These findings are not surprising as majority Muslim countries lack sustainable and equitable economic growth. Moreover, these countries suffer from higher inflation and unemployment with little or no monetary freedom due to fixed exchange rate regime, shallow financial markets and strict capital control

Futures trading, spot price volatility and market efficiency: evidence from European real estate securities futures

In 2007 futures contracts were introduced based upon the listed real estate market in Europe. Following their launch they have received increasing attention from property investors, however, few studies have considered the impact their introduction has had. This study considers two key elements. Firstly, a traditional Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model, the approach of Bessembinder & Seguin (1992) and the Gray’s (1996) Markov-switching-GARCH model are used to examine the impact of futures trading on the European real estate securities market. The results show that futures trading did not destabilize the underlying listed market. Importantly, the results also reveal that the introduction of a futures market has improved the speed and quality of information flowing to the spot market. Secondly, we assess the hedging effectiveness of the contracts using two alternative strategies (naïve and Ordinary Least Squares models). The empirical results also show that the contracts are effective hedging instruments, leading to a reduction in risk of 64 %

The engine of growth or its handmaiden? a time-series assessment of export-led growth

discussions. The analysis of the Penn-World Table (Mark 5.5) was greatly simplified by the spreadshee

An empirical testing of informational efficiency in Bangladesh capital market: Informational efficiency in Bangladesh capital market

We investigate how efficiently the stock market participants incorporate the information contained in money supply changes into stock prices in an emerging economy like Bangladesh. Of particular interest is to test how the changes inmonetary aggregates directly affect the stock prices through asset changes and indirectly through their effects on real economic activity. We have considered the monthly series of the real stock returns (P) and examine the relationship between stock returns and monetary aggregates from 1980 to 2008. We also include the exchange rate of US dollar against Bangladeshi Taka and industrial production index. The presence of cointegration between stock prices and monetary aggregates indicate long-run predictability of the Bangladesh stock market. The short-run dynamics between monetary aggregates and real stock return, relied on theoretically motivated long-run restrictions, are analyzed using an empirical structural VAR model. The dynamic response of the real stock returns to changes in macroeconomic variables (such as broad money supply, exchange rates), particularly its lagged responses to real economic activity generates inefficiency in the Dhaka Stock Exchange. The findings of this article indicate that informational inefficiency existsin the stock market of Bangladesh due to the presence of unidirectional causality. To be efficient, the infrastructure of the SEC should be modernized, revaluation of the net asset value of the companies should be audited by the affiliated firms of the SEC, demutualization should be done as early as possible, private placement, issue of preference share and book building methods must be under rule based. Insider trading should be strictly prohibited

Free trade agreements and equity market integration: the case of the US and Jordan

This study is aimed mainly to examine the impact of the US-Jordan Free Trade Agreement (UJFTA) on the degree of equity market's linkage. This issue is carried out through an asymmetric version of the Dynamic Conditional Correlation (DCC) model of Engle (2002) and developed by Sheppard (2002), which allows for asymmetries in both volatilities and conditional correlations. The empirical evidence suggests that the UJFTA has indeed increased substantially and significantly the linkages of the Jordanian capital market with the US equity markets. These results strongly support the argument that the direct trade flows is one of the most important determinant of cross-country linkages in equity markets.

The relationship between population growth and standard-of-living growth over 1870–2013: evidence from a bootstrapped panel Granger causality test

This paper examines the linkages between population growth and standard-of-living growth in 21 countries over the period of 1870–2013. We apply the bootstrap panel causality test proposed by Ko´nya (Econ Model 23:978–992, 2006), which accounts for both dependency and heterogeneity across countries. We find one-way Granger causality running from population growth to standard-ofliving growth for Finland, France, Portugal, and Sweden, one-way Granger causality running from standard-of-living growth to population growth for Canada, Germany, Japan, Norway and Switzerland, two-way causality for Austria and Italy, and no causal relationship for Belgium, Brazil, Denmark, Netherlands, New Zealand, Spain, Sri Lanka, the UK, the USA, and Uruguay. Dividing the sample into two subsamples due to a structural break yields different results over the two periods of 1871–1951 and 1952–2013. Our empirical results suggest important policy implications for these 21 countries as the directions of causality differ across countries and time period.http://link.springer.com/journal/106632018-02-27hb2016Economic