Islamic Banking and Finance: A New Paradigm in International Relations

by: Abdul Qayyum Khan & Arshad Ali Bhatti

This paper aims to explore whether Islamic banking and finance could be a means of developing new international relations among Muslim as well as non-Muslim countries. It uses self-administered survey data and employs descriptive and logistic regression for analysis. The key findings show that Islamic banking and finance is indeed a means of building up on new international relations by its integration with the conventional financial system. It does this by promoting education and research, and bringing peace and harmony in and among States by controlling radical elements. Also, it is a means to win friends with cooperation among Muslim nations and others through interfaith dialogue. This is the first empirical study of its kind on the matter in question.

Full Publication Link: http://jibm.org/wp-content/uploads/2018/09/5.-Article-4-Qayyum.pdf

Growth Effects of Real Exchange Rate Misalignment: Evidence from Pakistan

by: Arshad Ali Bhatti, Tauqir Ahmed, Babar Hussain

This paper assesses the growth effects of real exchange rate (RER) misalignment in Pakistan using annual data over the period 1980-2013. Its objectives are threefold: First, to examine the long run relationship between the real effective exchange rate (REER) and its economic fundamentals. Second, to estimate the equilibrium real effective exchange rate (EREER) and real exchange rate misalignment. Third, to test the hypothesis that undervaluation is associated with economic growth as claimed by Rodrik (2008). This study employs Autoregressive Distributed-lag (ARDL) bounds testing approach of Pesaran et al. (2001) to appraise the long-run equilibrium relationship between REER and macroeconomic variables. Further, the “Hodrick-Prescott (HP) filter” is used to compute the misalignment of REER. The empirical findings suggest that there is long- run relationship among REER, Real GDP per capita, trade openness, terms of trade, government expenditures, discount rate, FDI, and financial development. Further, Pakistani Rupee was found to be undervalued in 1980 by 17 %. It remained overvalued from 1981-85 with a highest misalignment of 24% in 1984. In the period thereafter (1986-1994), Pakistani Rupee remained undervalued. We observe different episodes of appreciation and depreciation of the local currency since 1995. However, the appreciation and depreciation was relatively smaller than the periods of 1980s and early 1990s. It is noted that Pakistani currency remained overvalued since 2010 that might adversely affect economic growth, while moderate undervaluation would increase the economic activity. Finally, it is found that REER misalignment Granger causes real GDP growth, whereas no feedback effect is observed. 

Publication Link: 
http://uog.edu.pk/downloads/journal/7_Growth_Effects_of_Real_Exchange_Rate_Misalignment_PJSI_70-88.pdf