On the Monetary Measures of Global Liquidity

By: Israr Ahmad Shah Hashmi, Arshad Ali Bhatti

Abstract:

This study constructs and examines the dynamics of theoretical and atheoretical measures of global liquidity, using monthly data on the components of broad money over the period 2001 M12-2017 M12 for 39 high income countries. We group the countries into five regional blocks as categorized by the World Bank: East Asia and the Pacific, Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, and North America. The atheoretical measures exploited by this study comprise of the simple-sum, GDP-weighted growth rates and PCA based aggregation methods; whereas theoretical measures include the currency equivalent and Divisia index techniques of monetary aggregation. We employ a graphical approach to investigate the trends and dynamics of the aggregates overtime, and a cross-correlation between cyclical components of global real economic activity and the lag of cyclical components of the measures of global liquidity to gauge the strength of their associations. The findings of this study reveal that theoretical measures outperform atheoretical ones in effective delineation of financial and liquidity conditions, and policy stance. Their cyclical components are also strongly associated with those of global real business activity. The currency equivalent measure, besides being a leading indicator of the shift in policy stance, has a sturdy association with global real business activity. Moreover, the theoretical measures, as noted by some empirical studies, contain some information content that the atheoretical lack.

Pub. Link: https://jfin-swufe.springeropen.com/articles/10.1186/s40854-019-0134-4

Impacts of Oil Discovery on Households in Uganda: A CGE Analysis

By: Koire Twaha, Arshad Ali Bhatti, Hasnain A. Naqvi

Abstract

This study analyses the impact of oil discovery on household poverty and inequality by employing a CGE model using 2007 SAM for Uganda. The oil production and export simulations show a decline in absolute poverty, poverty gaps, and severity. Further, our findings showcase a positive effect of production and exports on household welfare, except for urban farm households. This study recommends for the managers of the economy to pay special attention towards injection of a reasonable portion of oil rent in sectors which positively contribute to the economy, diversify non-oil exports and above all, boost private consumption.

Pub. Link: https://publishing.globalcsrc.org/ojs/index.php/reads/article/view/391/539

Causality among Stock Market and Macroeconomic Factors: A Comparison of Conventional and Islamic Stocks

By: Muhammad Hanif & Arshad Ali Bhatti

A recent development in financial markets is the creation of Shar¯ı‘ah compliant stock universes. Shar¯ı‘ah compliant stock universe is featured as socially responsible investments, less levered, and more reflective of the real sector. This study is conducted to understand and document the short-run equilibrium among important macroeconomic indicators and Equity indexesIslamic and conventional in the post-Shar¯ı‘ah-screening era in Pakistan. Comparative study of linkages among stock indexes and macroeconomic variables is of great interest to i) identify the important macroeconomic factors; and ii) document whether Shar¯ı‘ah screening of stocks has created any difference (in macro risk factors). We have included eight macroeconomic variables to study integration with stocks for 64 Months’ period (07/2011-10/2016). Evidence has been obtained by application of correlation, unit root, OLS-regression and Granger causality tests. Findings suggest that both markets Islamic & conventional are integrated with selected macroeconomic indicators. However, evidence lacks the integration of markets themselves. We identify a set of two variables from real economy exports and workers’ remittances-linked with both markets, while the third variable is different for Islamic (industrial production) and conventional (Money Supply (MS)) markets. Important monetary variables interest rate and inflation have shown an insignificant association. Movements of Islamic index are in-line with the theory i.e., disassociation from interest and reflection of the real economy. Movements of conventional index cover both real and monetary sectors.

Publication Link: https://jibm.org/archieves/volume8-issue2/volume8-issue2-article5/

Do power sector reforms affect electricity prices in selected Asian countries?

By: Tauqir Ahmed & Arshad Ali Bhatti

This paper examines the impact of power sector reforms on electricity prices using panel data for selected Asian countries over the period 1970–2017. We estimate two separate models for domestic and industrial prices. Our results from pooled OLS and the random effect model show that the impact of independent power producers, privatisation, restructuring, and deregulation on electricity prices is negative and significant, making both domestic and industrial consumers better off. However, the welfare effects of unbundling generation from transmission and distribution appear to be beneficial for residential end-users only. Our results also indicate that other reform indicators including third-party access and the existence of independent regulatory agencies may not be the right choice for a reduction in electricity prices, given the absence of a requisite conducive environment for regulations in our sample countries. Thus, the inconsistent behaviour of different regulatory reforms towards different countries and regions of the world needs to be considered in the policy formulation of the power sector. We also note that the results can be magnified in terms of significance with the exclusion of some outlier observations in the data.

Publication Link:

https://www.sciencedirect.com/science/article/pii/S0301421519301752?dgcid=author#!

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