nep-isf New Economics Papers
on Islamic Finance
Issue of 2021‒06‒14
eight papers chosen by
Mohamed Mohamed Tolba Said

  1. Downside Systematic Risk in Pakistani Stock Market: Role of Corporate Governance, Financial Liberalization and Investor Sentiment By Hussain, Shahzad; Akbar, Muhammad; Malik, Qaisar; Ahmad, Tanveer; Abbas, Nasir
  2. How ASEAN Can Improve Its Response to the Economic Crisis Generated by the COVID-19 Pandemic: Inputs drawn from a comparative analysis of the ASEAN and EU responses By Antonio Fanelli
  3. Bangladesh – Graduation from Least Developed Countries Status and Its Implications (Japanese) By USAMI Takashi; FUKUOKA Noriyoshi
  4. Oil Price Shocks and Economic Growth in Oil-Exporting Countries By Maryam Ahmadi; Matteo Manera
  5. ‘Rule-of-Thumb’ Instructions to Improve Fertilizer Management: Experimental Evidence from Bangladesh By Islam, Mahnaz; Beg, Sabrin
  6. Do economic endeavors complement sustainability goals in the emerging economies of South and Southeast Asia? By Sharma, Rajesh; Sinha, Avik; Kautish, Pradeep
  7. International Trade and Labor Markets: Evidence from the Arab Republic of Egypt By Robertson, Raymond; Vergara Bahena, Mexico Alberto; Kokas, Deeksha; Lopez-Acevedo, Gladys
  8. Does financial development reinforce environmental footprints? Evidence from emerging Asian countries By Sharma, Rajesh; Sinha, Avik; Kautish, Pradeep

  1. By: Hussain, Shahzad; Akbar, Muhammad; Malik, Qaisar; Ahmad, Tanveer; Abbas, Nasir
    Abstract: Purpose –We examine the impact of corporate governance, investor sentiment and financial liberalization on downside systematic risk and the interplay of socio-political turbulence on this relationship through static and dynamic panel estimation models.Design/methodology/approach – Our evidence is based on a sample of 230 publicly listed non-financial firms from Pakistan Stock Exchange (PSX) over the period 2008-2018. Furthermore, we analyze the data through Blundell and Bond (1998) technique in full sample as well sub-samples (Big & Small Firms). Findings –We document that corporate governance mechanism reduces the downside risk, whereas, investor sentiment and financial liberalization increase the investors’ exposure toward downside risk. Particularly, the results provide some new insights that the socio-political turbulence as a moderator weakens the impact of corporate governance and strengthens the effect of investor sentiment and financial liberalization on downside risk. Consistent with prior studies, the analysis of sub-samples reveal some statistical variations in large and small-size sampled firms. Theoretically, the findings mainly support agency theory, noise trader theory and the Keynesians hypothesis.Originality/value –Stock market volatility has become a prime area of concern for investors, policy makers and regulators in emerging economies. Primarily, the existence of market volatility is attributed to weak governance, irrational behavior of market participants, liberation of financial policies and sociopolitical turbulence. Therefore, the present study provides simultaneous empirical evidence to determine whether corporate governance, investor sentiment and financial liberalization hinder or spur downside risk in an emerging economy. Furthermore, our work relates to a small number of studies that examine the role of socio-political turbulence as a moderator on the relationship of corporate governance, investor sentiment and financial liberalization with downside systematic risk.
    Date: 2021–05–27
  2. By: Antonio Fanelli
    Abstract: This paper conducts a comparative review of the evolution of the economic crisis generated by the coronavirus disease (COVID-19) pandemic and the responses enacted by the Association of Southeast Asian Nations (ASEAN) and the European Union. It highlights differences and common elements in the strategic approaches, the intensity of the interventions, and governance structures. In the final section, it identifies short- and medium-term actions, inspired by the comparative analysis, which could contribute to improve the ASEAN response.
    Keywords: COVID-19, ASEAN, European Union, regional economic recovery, strategies
    JEL: P50
    Date: 2021–05–31
  3. By: USAMI Takashi; FUKUOKA Noriyoshi
    Abstract: This paper discusses the implications and impacts of Bangladesh's graduation from the Least Developed Countries (LDC) status through an analysis of the country's economic and industrial structure, a summary of the event of graduation, and a survey and analysis of issues in relation to Japanese companies. Bangladesh is expected to graduate from the LDC in 2026. While graduation has some advantages, such as improvement of the country's external image, it also has some disadvantages, such as the inability to use the special preferential tariffs that are granted to countries with that status by the international community. The survey conducted by the authors demonstrates that Japanese companies that operate in Bangladesh and that benefit from special preferential tariffs have already begun to gather information and are even considering transferring their production bases. In order to avoid losing such foreign direct investment, Bangladesh is looking into free trade agreements (FTAs). However, in addition, we believe it is necessary for Bangladesh to develop a friendly business environment that is comparable to that of neighboring Southeast Asian countries, to strengthen its industrial competitiveness, and improve the level of trade diversification. The Japanese government also needs to make further efforts to deepen bilateral economic relations.
    Date: 2021–04
  4. By: Maryam Ahmadi (Fondazione Eni Enrico Mattei); Matteo Manera (University of Milan-Bicocca, Fondazione Eni Enrico Mattei)
    Abstract: The aim of this paper is to investigate how major net oil exporter economies react to oil price shocks. We contribute to the literature by considering, at the same time, the possible nonlinearity and asymmetry of this relationship with respect to sign, size and causes of the oil price shocks, as well as the state of the economy in which the shocks occur. We apply a Threshold Structural VAR approach, characterized by a separation of the observations into different regimes based on a threshold variable, to model time series non-linearities. We use the economic activity as the threshold variable, as it divides economic development in two regimes under which we expect the effects of oil price shocks to differ. First, We find that the effects of oil price shocks on oil exporting economies greatly depend on the underlying cause of the shocks as well as the state of the economy. Second, we find little evidence of asymmetric response of output to the sign of oil price shocks. Our main findings warn decision makers in the area of macroeconomic planning that, when making decisions based on the oil price, the underlying causes of its variations as well as the state of the economy in which the oil price shocks occur have to be considered.
    Keywords: Oil Market, Output Growth, Macroeconomic Policy, Threshold SVAR
    JEL: C3 G11 Q41 Q43
    Date: 2021–05
  5. By: Islam, Mahnaz; Beg, Sabrin
    Abstract: Heavy government subsidies have led to inefficient application and overuse of fertilizer in Bangladesh. This results in higher than optimal costs to farmers and environmental and public costs. In a randomized controlled trial, we provide farmers with a simple tool (leaf color chart) and basic `rule-of-thumb' instructions to guide the timing and quantity of urea (nitrogen) application. Treatment farmers reduce urea use by 8\% without compromising yield, suggesting significant scope for improving urea management. The results are mainly driven by farmers delaying urea application as returns to urea are low early on in the season and urea applied is likely to be wasted. Cost-effectiveness estimates suggest that each dollar spent on this intervention produces a return of \$2.8 dollars due to reduction of urea use over three seasons, as well as significant environmental benefits. We also find suggestive evidence that optimizing the timing of urea application affects farmers' yields, plausibly as the intervention allows farmers to reallocate urea application to times when returns to urea are highest.
    Keywords: Technology Adoption, Farm Management, Environmental Economics, Resource Management
    JEL: H50 O12 O13
    Date: 2020–01–19
  6. By: Sharma, Rajesh; Sinha, Avik; Kautish, Pradeep
    Abstract: The consistent performance on the economic front and alarmingly increasing air pollution in the eight emerging economies of South and Southeast Asia compelled us to scrutinize whether the association between per capita income and carbon dioxide (CO2) emissions remained nonlinear during the study period (1990-2015). Further, we intended to examine the long-run impacts of financial development, trade expansion, and nonrenewable energy consumption on CO2 emissions. Considering the possibility of the cross-sectional dependency, we employed a relatively new approach, i.e. the cross-sectional augmented distributed lag mean estimation. The simulation results of the study confirmed an N-shaped environmental Kuznets curve in the selected emerging economies. Further, the improvements in the financial sector, nonrenewable energy consumption, and trade expansion contributed to increasing the level of CO2 emissions in the long run. Based on the outcomes, we proposed the policy framework, which may help in achieving Sustainable Development Goals.
    Keywords: CO2 emissions; financial development; nonrenewable energy resources; South and Southeast Asian countries; CS-DL
    JEL: Q5
    Date: 2021
  7. By: Robertson, Raymond (Texas A&M University); Vergara Bahena, Mexico Alberto (World Bank); Kokas, Deeksha (World Bank); Lopez-Acevedo, Gladys (World Bank)
    Abstract: Since the early 1990s, some developing countries have experienced a coincidence of rising exports – especially those related to global value chains – and improved labor market outcomes. During 2000–10, rising trade was associated with falling poverty and inequality in many developing countries. However, the Arab Republic of Egypt was not one of these countries, although it signed several trade agreements. The lack of trade-related improvements in labor market outcomes – including poverty, inequality, average wage levels, informality, and female labor force participation – could be explained by at least two possibilities. First, it is possible that trade agreements did not produce the same increase in trade for Egypt as for other countries. Second, it is possible that exports do not generate the same kinds of changes in labor market outcomes as experienced in other countries. After presenting the trends in key labor market outcomes over 2000–19, this paper evaluates both hypotheses. Using a gravity model approach, the results suggest that the changes in Egypt's exports following trade agreements are above internationally estimated averages. Second, the results from a Bartik approach find no significant relationship between rising exports and wages, informality, or female labor force participation. Additional analysis shows that Egypt's average wage levels are among the highest among countries that export the same goods exported by Egypt, possibly suggesting that Egypt has a relatively weak comparative advantage in currently exported goods, and thus might need to rethink its export basket.
    Keywords: labor market outcomes, trade agreements, Egypt
    JEL: J31 F16
    Date: 2021–06
  8. By: Sharma, Rajesh; Sinha, Avik; Kautish, Pradeep
    Abstract: In the preceding two decades, the expansion of financial services has played a vital role in pursuing economic growth agendas in the developing Asian nations. However, its harmful effect on environmental quality cannot be denied. In this backdrop, in the present study, we investigated whether the financial sector development moderated the ecological footprint, carbon footprint, and land footprint in the eight developing nations of South and Southeast Asia from 1990-2015. In doing so, we included the per capita income, energy solutions, and trade expansions as determinants of the ecological indicators. The results of the second-generation unit root tests and Westerlund’s cointegration test reported the long-run stability and cointegration, respectively. To navigate the possible cross-country dependency, we employed the cross-sectional augmented autoregressive distributed lag approach (CS-ARDL). The results confirmed that per capita income, energy solutions, trade expansion, and financial sector development invigorated the ecological footprint, carbon footprint, and land footprint in the long run. Further, it is reported that the development in the financial sector has a significant moderating impact on the nexus between energy and environmental footprints. In other words, the financial sector development drove the association between the overall environmental quality and energy solutions in the long run. Similarly, we observed that the financial sector development worked as a significant mediator between environmental proxies and trade expansion. By including the ecological footprint, carbon footprint, and land footprint as environmental proxies, the study provides the wider environmental spectrum. Based on the outcomes of the study, we proposed a novel scheme, which may help to address the harmful environmental impacts of the financial sector development in the selected developing nations.
    Keywords: Ecological footprint; carbon footprint; land footprint, South Asian countries; Southeast Asian countries; per capita income; energy
    JEL: Q5
    Date: 2021

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