nep-ara New Economics Papers
on Arab World
Issue of 2009‒03‒14
two papers chosen by
Quentin Wodon
World Bank

  1. The Influence of Culture on Economic Outcomes: An Exploration of Islamic Finance as a New Transmission Channel By Laurent Gheeraert
  2. International Financial Integration and Real Exchange Rate Long-Run Dynamics in Emerging Countries: Some Panel Evidence By Caporale, Guglielmo Maria; Hadj Amor, Thouraya; Rault, Christophe

  1. By: Laurent Gheeraert (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.)
    Abstract: Islamic finance is one of the most prominent phenomena over the last decade in the banking industry in the Middle-East and South-East Asia. It has recently spread in non-Muslim countries, such as the UK or the US. Globally, assets on the books of Shariah-compliant commercial banks have exceeded 350 Billion USD in 2005 and grown by an average of 29% annually from 2000. In spite of the substantial size and growth of this segment, the role of Islamic banking in the economy is still heavily debated and very few empirical work is available. This paper studies the impact of Islamic banking on financial sector development. It circumvents the lack of data through a newly-constructed and comprehensive database, “IFIRST”, covering Islamic commercial banks worldwide over the period 2000-2005. This database is, to our knowledge, unique in the industry. After controlling for standard determinants and potential endogeneity, using religion as an instrument, we find strong and significant empirical evidence of a positive role of Islamic banking on countries’ financial sector development, as measured by private credit over GDP.
    Keywords: culture, religion, Islamic Finance, financial sector development, growth.
    Date: 2008–03
  2. By: Caporale, Guglielmo Maria (Brunel University); Hadj Amor, Thouraya (University of Nice Sophia-Antipolis); Rault, Christophe (University of Orléans)
    Abstract: The aim of this paper is to provide new empirical evidence on the impact of international financial integration on the long-run Real Exchange Rate (RER) in 39 developing countries belonging to three different geographical regions (Latin America, Asia and MENA). It covers the period 1979-2004, and carries out “second-generation” tests for non-stationary panels. Several factors, including international financial integration, are shown to drive the long-run RER in emerging countries. It is found that the new financial environment characterised by international financial integration leads to a depreciation of the RER in the long run. Further, RER misalignments take the form of an under-valuation in most MENA countries and an over-valuation in most Latin American and Asian countries.
    Keywords: emerging economies, real exchange rate, financial integration, misalignment, second-generation panel unit root and cointegration tests
    JEL: E31 F0 F31 C15
    Date: 2009–02

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