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

Determinants of Return Migration- A Case Study of Return from Greece

by: Tanveer Ahmad Naveed, Arshad Ali Bhatti, Sami Ullah
Various migration theories suggest different variables to reveal determinants, degree and dynamics 

of return migration. Some theories discuss the economic aspects of the return migration at individual and household levels like neo-classical and new economics of labor migration theories. Others explore the micro and macro aspects of return migration like transnationalism, structuralism and social network theory. The difference of their interpretations depends upon the conceptual frameworks of each approach. This paper investigates the determinants of return migration on the basis of existing theories of migration. For this purpose, through pre-structured questionnaire, the primary data is collected from 230 Pakistani migrants in Greece who belong to district Gujrat (Pakistan).We employ binary logistic regression analysis to conclude that Pakistani migrants move to Greece with the purpose of higher earnings expectations, employment and permanent settlement but they miscalculate their abilities of economic, social and cultural integration in the host country. Thus, integration failure causes return migration. Hence, the neo-classical theory mainly explains the experience of return migration. Finally, the study recommends utilizing the potentials (human capital and savings, etc.) of return migrants by providing them employment and investment facilities for generating economic growth in home country. 

Link: http://uog.edu.pk/downloads/journal/PJSI_32-48.pdf

Education In Pakistan-Awareness Video

Vicky Noon Educational Foundation Oxford Scholarships for Pakistani Students in UK, 2018

The Vicky Noon Educational Foundation is offering scholarships for Pakistani students to pursue full or part-time master’s or DPhil course at the University of Oxford. The size and duration of awards vary according to each scholar’s circumstances. Scholarships will be awarded on the basis of academic merit, financial need and the potential social contribution made by the applicant on their return to Pakistan.

for details: 

http://www.ox.ac.uk/admissions/graduate/fees-and-funding/fees-funding-and-scholarship-search/vicky-noon-educational-foundation-oxford-scholarships

Earnings Quality: A Missing Link between Corporate Governance and Firm Value

by: Khalid Latif, Arshad Ali Bhatti, Abdul Raheman

The existing literature concerning governance-value relationship is inconclusive as it assumes that the association is direct. A theoretical argument suggests that the effective corporate governance reduces the information asymmetry through better financial reporting quality. This serves as a tool to reduce this information risk. Following the argument, our study is an attempt to investigate the mediating role of earnings quality, a measure of financial reporting quality, in governance-value association. For estimation, we use a panel data of 214 non-financial listed firms in Pakistan for the period 2003-2014 and employ one-way random effect estimator for the SUR system, as suggested by Biørn (2004). Our findings show that the corporate governance effectively improves the earnings quality and value of the firm, which approves the monitoring role. Moreover, earnings quality contributes positively in maximizing the value of the firm and the results demonstrate that better earnings quality partially mediates the governance-value association. It is concluded that corporate governance not only improves the value of the firm directly, but also indirectly through the channel of earnings quality.

http://www.imsciences.edu.pk/files/journals/2017-vol-2/New%2011.pdf

Inflation, Output Growth and Macroeconomic Uncertainties in Pakistan and India

By: Rasul, S., Bhatti, A. A. Khan, H. & Jabeen, M.
This paper examines the dynamic relationships among inflation, output growth and their uncertainties for Pakistan and India for the period 1982-M4 to 2012-M12. We use various GARCH models to estimate the conditional variances that are used as proxies for the uncertainties of inflation and output growth. Finally, we use the bi-variate ARMA (p,q)-GARCH-M (1,1) models with diagonal BEKK specification to find the twelve causal relationships among inflation, output growth and their uncertainties. Our evidence supports the number of important conclusions. Firstly, we find that Friedman (1977) hypothesis, i.e., inflation leads to increase the inflation uncertainty is not supported in both Pakistan and India. Secondly, Cukierman-Meltzer (1986) hypothesis is accepted in Pakistan and Holland (1995) hypothesis is accepted in India. Thirdly, Black (1987) hypothesis is accepted in Pakistan and Deveraux (1989) hypothesis is accepted in India. We also find the strong relationship that higher output growth reduces the inflation in both India and Pakistan. We also conclude that the policy makers of both countries may take measures to reduce inflation rate because output growth is inversely related to inflation and the prevailing uncertainty in the economy.

http://www.bzu.edu.pk/PJSS/Vol36No12016/PJSS-Vol36-No1-14.pdf