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An analysis of the dynamic linkages between the cash rate and the government yield curve: a case study
No full textThis paper aims to examine the relationship between the rate of interest on the key instrument of monetary policy in Australia, the overnight cash rate and the debt instruments comprising the Australian Government Yield curve, during the climate of low inflation and transparent monetary policy in Australia since the early 1990s. This relationship is fitted to an Expectations Theory based function. The methods applied are the error-correction and variance decompositions techniques including the most recently developed ‘long run structural modelling’ (Pesaran and Shin, 2002). The findings indicate that, contrary to common belief, longer-term interest rates more often than not tend to lead the cash rate and other shorterterm rates. Australian monetary policy relies on the assertion that the shorter term rate leads the longer term rates, and that changes in the cash rate will reverberate through the yield curve to the longer term rates, which in turn affect aggregate demand and other economic indicators. The findings of our study based on the recent rigorous time-series techniques tend to cast doubts on the efficiency and effectiveness of current monetary policy in Australia
House price‐stock price relations in Thailand: an empirical analysis
No full textThe purpose of this paper is to empirically evaluate the wealth and credit-price effects in the relations between housing prices and stock prices for Thailand using quarterly data from 1995 to 2006. The analysis relies on a four-variable vector autoregression (VAR) framework consisting of house prices, stock prices, real output and consumer prices. Granger causality tests, impulse-response functions and variance decompositions simulated from the estimated VAR systems are adopted as bases for inferences. The results obtained from Granger causality tests, impulse response functions and variance decompositions all suggest a unidirectional causality that runs from stock prices to house prices. Thus, the wealth effect is unequivocally supported for the Thai case. The paper also documents the importance of real activity in influencing both house and stock prices. Likewise, stock prices do exert significant effects on real output and to some extent the general price level. These results have an implication that stock market stability is critical for the stability of the housing market as well as the goods market. The paper provides an emerging market perspective on stock price – house price relations, which seem to be lacking in the literature
Peranan dan tanggungjawab ahli lembaga pengarah syarikat dalam perspektif Islam
No full textTujuan syarikat ditubuhkan adalah untuk melakukan sesuatu kegiatan yang berfaedah kepada pemiliknya, pekerjanya, pengurusannya, pelanggannya. Pengurusan merancang, melaksana, mengurus dan memanta. Pekerja melakukan segala kegiatan bagi mencapai tujuan penubuhan syarikat dibawah pengawasan pengurusan. Pemiliksyarikat (dalam hal ini Negeri Kedah Darulaman) telah mengeluarkan modal yang besar dengan harapan syarikat itu maju. Kerajaan Negeri melantik Pengurus Besar dll untuk melaksanakan kegiatan syarikat. Kerajaan Negeri melan.tik Ahli Lembaga Pengarah untuk mengawal, memantau, menentukan strategi, dasar, peraturan, budaya kerja, dll supaya syarikat maj
Struktur pinjaman dan pendedahan risiko bagi 3-faktor CAPM: kajian kes di Malaysia
No full textThis study addresses the linkages between lending structure and bank risk exposures via the Capital Asset Pricing Model (CAPM). Based on the 3-factor CAPM, five risk measures are examined; namely, the market, interest rate, exchange rate, total and unsystematic risk exposure. The influence of lending structure is analysed via four measures, the real estate lending, the specialisation index, the short-term lending stability, and the medium-term lending stability. Our findings show that the lending structure affects the market, interest rate, and unsystematic risk exposures. The stability of lending structure in both the short-term and medium-term period positively influence the market and interest rate risk exposure. On the other hand, the medium-term lending structure stability negatively affects the unsystematic risk exposure. Thus, the policy makers, bankers, and investors should not ignore the significant role of the lending structure when developing a strategic risk management framework
Islamic finance: why it makes sense
No full textThis book looks at Islamic finance from the perspective of the consumer who has to make very important financial decisions throughout his or her life. It provides timely and highly relevant lessons on the: principles of Islam that form the bedrock of Islamic finance; similarities and differences between conventional and Islamic finance transactions; and types of Islamic financial products and the various contracts underlying them
Reviving the ethics of Islamic finance
No full textWhen it comes to definitions of ethics, and business ethics in particular, we have relied in this paper on a quick survey of the literature. We also referred to other writings to explain how interest-based lending escaped religions morality in the west. After providing an Islamic perspective of ethics and business ethics, the article directs itself to the moral responsibilities of system participants. Naturally there is a great deal of soul searching to do and there are tough questions that must be answered by everyone. In this regard, more questions than answers are provided. As a result, the Islamic finance system is found to have deviated from its own ethics and must put some efforts in their regaining. In order to gain the ethics of Islamic finance, the article proposes some modifications in the current system, with a special attention on the process of certification of members of Shari'ah boards before their appointment. In addition, a new system of human resource development is proposed, based on comprehensive treatment of shortages in both knowledge and skills. Rating agencies are called upon to introduce the Shari'ah aspects in their rating systems and specific elements have been proposed in this regard
The paradox struggle between the Islamic and conventional banking systems
No full textMalaysia is a multi religious and a multi ethnic society with a plural legal structure. The banking system of country is essentially dual in nature and hence, there are two different sets of legal framework working simultaneously. Today, the Islamic Banking system which emerged in 1983 has levelled up to the conventional banking system which had rooted itself in the society a long time ago. Whether we believe it or not there are challenges and clashes at hand due to the existence of the dual system in the society and they need to be addressed properly, so that the clashes between these two types of banking system can be minimized. There are several quarrels between conventional and Islamic Banking laws. Some of these clashes are created due to the application of common law or conventional law based legislation to resolve the problems in the Islamic banking system. The impact of this is huge, primarily because, Islamic economics has a different premise from conventional banking and applying the same legal principles to resolve disputes for both markets does not work. Unlike conventional banking�s capitalist conviction that winner takes all, Islam argues for a fair distribution of profit and loss and bans purely speculative activity
Systematic risk and time scales: new evidence from an application of wavelet approach to the emerging Gulf stock markets
No full textThe paper is the first attempt to estimate systematic risk ‘beta’ at different time scales in the context of the emerging Gulf Cooperation Council (GCC) equity markets by applying a relatively new approach in finance known as wavelet analysis. Our results indicate that on average beta coefficients in all GCC countries show a multiscale tendency. This is consistent with our theoretical expectation that stock market investors have different time horizons due to different trading strategies and that is also reflective of the characteristics of the GCC markets in particular in that they are less developed, less liquid, involve more transaction costs, highly dependent on individual investors, and prone to infrequent trading. Further, we analyze the impact of different time scales on Value at Risk (VaR) and find that VaR measured at different time scales suggests that risk tends to be concentrated more at the higher frequencies (lower time scales) of the data. The results are plausible and intuitive and have strong policy implications
Clash of convictions: conventional banking vs Islamic banking
No full textMalaysia is a religiously and ethnically versatile country with a dual legal structure. Essentially, Malaysia's banking system is plural and thus, two different sets of legal systems work at the same time. The semi-permanent conventional banking system has been leveled off by the Islamic banking system which emerged only in 1983. Whether accepted or not, the dual system which emerged only in 1983. Whether accepted or not, the dual system in the society has created challenges and clashes between the two, and these must be addressed and dealt with properly, so as to trim down such clashes to a minimum. Several quarrels exist between conventional and Islamic banking laws; some which arise due to the application of common law or conventional law to justify problems in Islamic banking system. The impact of this is huge; as applying the same legal principles enforced in the conventional banking system to adjudicate conflicts in the Islamic banking system - which has different economic principles - does not work at all. Islam contends for a fair distribution of profits and loss and bans questionable activities unlike the conventional banking capitalistic belief that winner takes all
Strong structure: the Islamic financial system and lessons of the recent crisis
No full textOver the past few decades, a consensus has emerged that expansion of credit and debt is detrimental to the stability of developing economies. For example, the IMF has advised its developing country members that in order to mitigate the risk of instability, such as occurred in the emerging markets in 1997, they should: Avoid debt-creating flows. 2. Rely mostly on foreign direct investment as external financing. 3. If they must borrow, ensure that their external debt is never larger than 25% of GDP and that their debt obligations are not bunched toward the short end of maturities. 4. Ensure that their economy is producing large enough primary surpluses to meet their debt obligations. 5. Ensure that their sovereign bonds incorporate clauses (such as majority action,initiation and engagement clauses) to make debt workouts and restructurings easier - that is, to ensure that there exist better risk-sharing mechanisms associated with their debt obligations to avoid moral hazard. 6. Ensure that domestic corporations have transparent balance sheets, follow mark-to-market accounting, and have financial structures that are biased more heavily toward equity and internal funding and are not heavily leveraged. 7. Ensure that their domestic financial institutions are regulated and supervised efficiently, are not highly leveraged, follow prudent credit policy and are highly transparent