nep-ara New Economics Papers
on Arab World
Issue of 2010‒12‒04
seven papers chosen by
Quentin Wodon
World Bank

  1. Risk Management In Mudharabah And Musharakah Financing Of Islamic Banks By Irawan Febianto
  2. Determinants of the Foreign Exchange Risk Premium in Gulf Cooperation Council Countries By Tigran Poghosyan
  3. Symptomy kryzysu globalnego a etyka gospodarcza religii światowych. Analiza porównawcza bankowości islamskiej i bankowości klasycznej w kontekście kryzysu finansowego By Czerniak, Adam
  4. Cost Structure In Indonesian Islamic Banks: (Case on PT. Bank Syariah Mandiri and PT. Bank Syariah Mega Indonesia) By Mokhamad Anwar
  5. Spillovers from Europe into Morocco and Tunisia By Reinout De Bock; Daniel Florea; Joël Toujas-Bernate
  6. The Impact of Auditor Rotation on the Audit Quality: A Field Study from Egypt By Diana Mostafa; Magda Hussien
  7. Fixed Exchange Rate Regimes and Price Stability: Evidence from MENA Countries By Darine Ghanem

  1. By: Irawan Febianto (Laboratory Management Faculty of Economics (LMFE))
    Abstract: The low level participation of the Islamic banks in mudharabah and musharakah financing models has become one of the problems in the development of the industry. This arrangements are unique to Islamic banking and account for its superiority over conventional banking on grounds of ethics and efficiency, but the majority of Islamic banks have limited themselves to less risky trade-financing assets, which tend to be a shorter maturity. This paper tries to analyzes why Islamic banks are reluctant to indulge in mudharabah and musharakah financing. It introduces the theoretical model of balance sheet to compare them to the practices of Islamic banking. Then this paper analyze the reasons why Islamic banks tend to avoid such financing models. In the end it explore the risk management concept that might solve the problem.
    Keywords: Islamic banks, profit and loss sharing arrangements, risk management
    JEL: G0
    Date: 2010–11
  2. By: Tigran Poghosyan
    Abstract: This paper analyzes macroeconomic determinants of the foreign exchange risk premium in two Gulf Cooperation Council (GCC) countries that peg their currencies to the U.S. dollar: Saudi Arabia and the United Arab Emirates. The analysis is based on the stochastic discount factor methodology, which imposes a no arbitrage condition on the relationship between the foreign exchange risk premium and its macroeconomic determinants. Estimation results suggest that U.S. inflation and consumption growth are important factors driving the risk premium, which is in line with the standard C-CAPM model. In addition, growth in international oil prices influences the risk premium, reflecting the important role played by the hydrocarbon sector in GCC economies. The methodology employed in this paper can be used for forecasting the risk premium on a monthly basis, which has important practical implications for policymakers interested in the timely monitoring of risks in the GCC.
    Keywords: Consumption , Cooperation Council for the Arab States of the Gulf , Currency pegs , Economic models , Foreign exchange , Inflation , Oil prices , Risk premium , Saudi Arabia , United Arab Emirates , United States ,
    Date: 2010–11–11
  3. By: Czerniak, Adam
    Abstract: This article deals with the issue of Islamic Banking and its differences from the classical, anglo-saxon banking system. It investigates the availability, prices and volatility of Islamic financial instruments during the global financial crisis in comparison to the behavior of similar instruments offered by commercial banks. For this purpose 3 hypothesis, based on conclusions from the state-of-the-art research on Islamic Finance, were tested: (1) because of the prohibition of speculation, high risk aversion and a distinctive form of enterprise financing the equity prices of shariah-compliant firms were less volatile and more stable than other equity prices; (2) the asset portfolio of classical banks were much more riskier than of similar Shariah-compliant banks; (3) the higher level of trust between Islamic financial market participants induced by sharing the same religion, values and the same set of moral and formal rules has reduced in comparison to the classical banking scheme the dry-up of interbank money liquidity caused by the recent financial crisis. The results of the conducted tests indicate that there were no major differences between Shariah-compliant and commercial banks during the recent financial crisis.
    Keywords: Islamic Banking; Financial Crisis; Ethics
    JEL: A13 P51 E44
    Date: 2010–11
  4. By: Mokhamad Anwar (Department of Management and Business, Faculty of Economy, Padjadjaran University)
    Abstract: This paper tries to observe the cost structure in two prominent Islamic banks in Indonesia. The Bank’s cost structures are viewed in many ways such as operational and non-operational costs, and fund costs and non-fund costs. The study employed descriptive analysis to explain the data characteristics from the banks and tried to make evaluation by comparing the data within the same time. The result of the study showed that there was a similarity about those Islamic bank’s cost structures behavior, but there were also some differences among those within the study period. By using inferential statistics method, especially with meandifferences test, the study demonstrated that the null-hypothesis was rejected which means that there were differences about the cost structures between both Islamic banks within the period.
    Keywords: operational cost, non-operational cost, islamic banks
    JEL: G0
    Date: 2010–08
  5. By: Reinout De Bock; Daniel Florea; Joël Toujas-Bernate
    Abstract: This paper examines the economic and financial linkages between Morocco and Tunisia and their European partners. Using structural vector autoregressions, we find that growth shocks in European partner countries generate significant responses on growth in Morocco and Tunisia. For Tunisia, exports and, to a much lesser extent, tourism appear to be the major transmission channels. In Morocco, exports, remittances and tourism play relatively equal roles. An analysis with sectoral data supports these results.
    Keywords: Business cycles , Cross country analysis , Economic growth , Economic recession , Europe , Exports , External shocks , Inward remittances , Morocco , Spillovers , Tourism , Tunisia ,
    Date: 2010–10–21
  6. By: Diana Mostafa (Faculty of Management Technology, The German University in Cairo); Magda Hussien (Faculty of Commerce, Ain Shams University, Cairo)
    Abstract: Lack of audit quality and subsequent audit failures result mainly from a lack of independence which is considered to be a consequence of the extended auditor client relationship. Actually, the results of a questionnaire distributed among auditors in Egypt confirm this hypothesis: The Auditors strongly agree that there is a lack of auditor independence in Egypt. The main reason is that most of the companies are closely held and that there is a lack of existence of code of ethics for auditing practitioners in Egypt. Also, the results indicate that the mostly accepted solution by the auditors to overcome the lack of independence problem is the mandatory auditor rotation. Consequently, the paper suggests that mandatory firm rotation instead of mandatory partner rotation should be applied in Egypt.
    Keywords: Audit Quality, Auditor Rotation, Auditor Independence, Egypt
    JEL: M42 M40
    Date: 2010–11
  7. By: Darine Ghanem
    Abstract: In this study, we empirically test whether pegged regime was successful in achieving and maintaining consistently low inflation rates in 17 MENA countries over the period of 1980-2007. Taking into account unobserved country heterogeneity, as well as, the endogeneity of exchange rate regimes we estimate a dynamic panel data model of the effects of exchange rate regimes on inflation using officially announced exchange rate regimes in addition to de facto regimes in place. Our findings suggest a strong link between the choice of the exchange rate regime and inflation performance.[...]
    Date: 2010–11

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