The efficiency and productivity of Malaysian banks:an output distance function approach

This study employs stochastic frontier analysis to analyze Malaysian commercial banks during 1996-2002, and particularly focuses on determining the impact of Islamic banking on performance. We derive both net and gross efficiency estimates, thereby demonstrating that differences in operating characteristics explain much of the difference in outputs between Malaysian banks. We also decompose productivity change into efficiency, technical, and scale change using a generalised Malmquist productivity index. On average, Malaysian banks experience mild decreasing return to scale and annual productivity change of 2.37 percent, with the latter driven primarily by technical change, which has declined over time. Our gross efficiency estimates suggest that Islamic banking is associated with higher input requirements. In addition, our productivity estimates indicate that the potential for full-fledged Islamic banks and conventional banks with Islamic banking operations to overcome the output disadvantages associated with Islamic banking are relatively limited. Merged banks are found to have higher input usage and lower productivity change, suggesting that bank mergers have not contributed positively to bank performance. Finally, our results suggest that while the East Asian financial crisis had an interim output-increasing effect in 1998, the crisis prompted a continuing negative impact on the output performance by increasing the volume of non-performing loans

Efficiency in Islamic and conventional banking:an international comparison

The paper investigates the efficiency of a sample of Islamic and conventional banks in 10 countries that operate Islamic banking for the period 1996 to 2002, using an output distance function approach. We obtain measures of efficiency after allowing for environmental influences such as country macroeconomic conditions, accessibility of banking services and bank type. While these factors are assumed to directly influence the shape of the technology, we assume that country dummies directly influence technical inefficiency. The parameter estimates highlight that during the sample period, Islamic banking appear to be associated with higher input usage. Furthermore, by allowing for international differences in the underlying inefficiency distributions, we are also able to demonstrate statistically significant differences in efficiency across countries even after controlling for specific environmental characteristics and Islamic banking. Thus, for example, our results suggest that Sudan and Yemen have relatively higher inefficiency while Iran and Malaysia have lower estimated inefficiency. Except for Sudan, where banks exhibits relatively strong returns to scale, most sample banks exhibit very slight returns to scale, although Islamic banks are found to have moderately higher returns to scale than conventional banks. However while this suggests that Islamic banks may benefit from increased scale, we would emphasize that our results suggest that identifying and overcoming the factors that cause Islamic banks to have relatively high input requirements will be the key challenge for Islamic banking in the coming decades

Monsoons, ITCZs, and the Concept of the Global Monsoon

Earth's tropical and subtropical rainbands, such as Intertropical Convergence Zones (ITCZs) and monsoons, are complex systems, governed by both large‐scale constraints on the atmospheric general circulation and regional interactions with continents and orography, and coupled to the ocean. Monsoons have historically been considered as regional large‐scale sea breeze circulations, driven by land‐sea contrast. More recently, a perspective has emerged of a global monsoon, a global‐scale solstitial mode that dominates the annual variation of tropical and subtropical precipitation. This results from the seasonal variation of the global tropical atmospheric overturning and migration of the associated convergence zone. Regional subsystems are embedded in this global monsoon, localized by surface boundary conditions. Parallel with this, much theoretical progress has been made on the fundamental dynamics of the seasonal Hadley cells and convergence zones via the use of hierarchical modeling approaches, including aquaplanets. Here we review the theoretical progress made and explore the extent to which these advances can help synthesize theory with observations to better understand differing characteristics of regional monsoons and their responses to certain forcings. After summarizing the dynamical and energetic balances that distinguish an ITCZ from a monsoon, we show that this theoretical framework provides strong support for the migrating convergence zone picture and allows constraints on the circulation to be identified via the momentum and energy budgets. Limitations of current theories are discussed, including the need for a better understanding of the influence of zonal asymmetries and transients on the large‐scale tropical circulation

The Dynamics of the Global Monsoon: Connecting Theory and Observations

Earth's monsoons are complex systems, governed by both large-scale constraints on the atmospheric general circulation and regional interactions with continents and orography, and coupled to the ocean. Monsoons have historically been considered as distinct regional systems, and the prevailing view has been, and remains, an intuitive picture of monsoons as a form of large-scale sea breeze, driven by land-sea contrast. However, climate dynamics is seldom intuitive. More recently, a perspective has emerged within the observational and Earth system modeling communities of a global monsoon that is the result of a seasonally migrating tropical convergence zone, intimately connected to the global tropical atmospheric overturning and localized by regional characteristics. Parallel with this, over the past decade, much theoretical progress has been made in understanding the fundamental dynamics of the seasonal Hadley cells and Intertropical Convergence Zones via the use of hierarchical modeling approaches, including highly idealized simulations such as aquaplanets. Here we review the theoretical progress made, and explore the extent to which these theoretical advances can help synthesize theory with observations and understand differing characteristics of regional monsoons. We show that this theoretical work provides strong support for the migrating convergence zone picture, allows constraints on the circulation to be identified via the momentum and energy budgets, and lays out a framework to assess variability and possible future changes to the monsoon. Limitations of current theories are discussed, including the need for a better understanding of the influence of zonal asymmetries and transients on the large-scale tropical circulation

Rapid and extensive warming following cessation of solar radiation management

Solar radiation management (SRM) has been proposed as a means to alleviate the climate impacts of ongoing anthropogenic greenhouse gas (GHG) emissions. However, its efficacy depends on its indefinite maintenance, without interruption from a variety of possible sources, such as technological failure or global cooperation breakdown. Here, we consider the scenario in which SRM—via stratospheric aerosol injection—is terminated abruptly following an implementation period during which anthropogenic GHG emissions have continued. We show that upon cessation of SRM, an abrupt, spatially broad, and sustained warming over land occurs that is well outside 20th century climate variability bounds. Global mean precipitation also increases rapidly following cessation, however spatial patterns are less coherent than temperature, with almost half of land areas experiencing drying trends. We further show that the rate of warming—of critical importance for ecological and human systems—is principally controlled by background GHG levels. Thus, a risk of abrupt and dangerous warming is inherent to the large-scale implementation of SRM, and can be diminished only through concurrent strong reductions in anthropogenic GHG emissions.James S. McDonnell Foundation (Postdoctoral Fellowship)Tamaki FoundationNational Science Foundation (U.S.) (TeraGrid resources, Texas Advanced Computing Center, Grant TG-ATM090059