nep-isf New Economics Papers
on Islamic Finance
Issue of 2022‒06‒13
nine papers chosen by

  3. Financial Development and Income Inequality: Evidence from Advanced, Emerging and Developing Economies By Carolyn Chisadza; Mduduzi Biyase
  4. A Critical Appraisal of Tax Expenditures in Pakistan By Mahmood Khalid; Naseem Faraz
  5. Is Pakistan Entering into the Digital Currency Ecosystem? By Saddam Hussein; Abdul Jalil
  6. The digital economy, privacy, and CBDC By Ahnert, Toni; Hoffmann, Peter; Monnet, Cyril
  7. Cryptocurrencies and Decentralized Finance (DeFi) By Igor Makarov; Antoinette Schoar
  8. The Collateral Channel and Bank Credit By Arun Gupta; Horacio Sapriza; Vladimir Yankov
  9. A Corporate Finance Perspective on Environmental Policy By Heider, Florian; Inderst, Roman

  1. By: Putra, Haris Maiza
    Abstract: Currently, the concept of sharia has become a trend in the global economy, ranging from food and beverage products, to finance, to lifestyle. As a new trein of lifestyle, many countries are starting to introduce their tourism products with halal and Islamic concepts. This research is to discuss the implementation of DSN MUI fatwa No. 108/DSN-MUI/X/2016 regarding guidelines for tourism implementation based on sharia principles in West Java. This research is normative juridical research by analyzing the fatwa of DSN MUI No. 108/DSN-MUI/X/2016. The results of the study show that Halal Tourism is a service that is integrated with the concept of Islamic economics. The main foundation of halal tourism is the Qur'an and As-Sunnah. The existence of these inherent Islamic values makes tourists in carrying out tourism activities in addition to obtaining worldly pleasures, they also get the pleasure that is in line with values that are in harmony and in line to carry out Shari'ah, namely maintaining human welfare which includes protection of faith, life, reason, lineage, and property. The economic implications are not only for the world but also for religion. The application of Halal Tourism is the application of the concept of Islamic economics. Halal Tourism is a way of da'wah. The policy design that supports the realization of each concept is an effort to support Islamic da'wah.
    Date: 2022–04–08
  2. By: Haya, Nur Anni; , wanda
    Abstract: Bank syariah adalah bank yang melaksanakan kegiatan usaha berdasarkan prinsip Syariah, yaitu aturan perjanjian berdasarkan hukum Islam antara bank dan pihak lain untuk penyimpanan dana dan atau pembiayaan kegiatan usaha, atau kegiatan lainnya yang dinyatakan sesuai dengan Syariah
    Date: 2022–04–09
  3. By: Carolyn Chisadza (Department of Economics, University of Pretoria, Pretoria, South Africa); Mduduzi Biyase (Director of the Economic Development and Well-being Research Group (EDWRG); Senior lecturer at the School of Economics, University of Johannesburg)
    Abstract: Using a broad-based index of financial development, this paper investigates the effects of financial development on income inequality for 148 countries between 1980 and 2019. The findings indicate that in general, financial development reduces inequality across emerging and least developed countries, but is not statistically significant for advanced countries. However, when we disaggregate the financial development index into its sub-components (financial institutions and financial markets), we find different effects on inequality, based on the levels of development. Further investigation on the dimensions under financial institutions and financial markets (depth, access and efficiency) reveals that banking sector development under financial institutions has income inequality-reducing effects in emerging and least developed countries, while stock market development under financial markets widens inequality in least developed countries. The findings in our paper firstly highlight the nuances in financial development depending on the level of development in countries, and secondly that policies focussed on financial inclusion of the poor can mitigate inequality.
    Keywords: financial development, financial markets, inequality, financial institutions
    JEL: C22 D63 G20 O55
    Date: 2022–04
  4. By: Mahmood Khalid (Pakistan Institute of Development Economics); Naseem Faraz (Pakistan Institute of Development Economics)
    Abstract: PTI Government presented a balanced budget for FY2021-22 under tough economic conditions with an aim to achieve GDP growth and manage fiscal balance. The outlay of budget for FY 2021-22 stood at Rs 8.49 Trillion, up 19% from revised numbers of previous year. Higher expenditures have not been matched by higher taxes though for the same period. Tax collection by FBR has increased by 9.92% in FY2021 over the last year. However it is a good tax revenue growth despite economic collapse of last year, but, a lot needs to be done on the tax policy side, especially, the concessionary regime extended. This resulted in need for a supplementary finance bill after the IMF 6th Review Mission – October 4-19, 2021. It is reported that the demand of IMF was Rs 700 Billion in lieu of GST Tax expenditures reduction which was conceded upto Rs 343 Billion. These concessions are often criticised for being influenced by the lobbying and rent seeking segments(Ahmed, 2019). PIDE has been repeatedly suggesting key reforms in the overall tax Policy regime thus making it conducive for growth (see PIDE, 2020; 2021).
    Keywords: Critical Appraisal, Tax Expenditures, Pakistan
    Date: 2022
  5. By: Saddam Hussein (Pakistan Institute of Development Economics); Abdul Jalil (Pakistan Institute of Development Economics)
    Abstract: Digital currency is defined as any currency available exclusively in electronic form. For instance, you could go to an Auto Teller Machine (ATM) or a bank and turn an electronic record of your currency holdings into physical dollars. However, it never takes physical form. It always remains on a computer network and is exchanged via digital means. For example, instead of using physical Rupee notes, you would make purchases by transferring digital currency to retailers using your mobile device. Digital currency is the future because of faster payments, less expensive, smooth international transactions, efficiency, lesser corruption, and maximum financial inclusion.
    Keywords: Pakistan, Digital Currency, Ecosystem
    Date: 2022
  6. By: Ahnert, Toni; Hoffmann, Peter; Monnet, Cyril
    Abstract: We study a model of financial intermediation, payment choice, and privacy in the digital economy. Cash preserves anonymity but cannot be used for more efficient online transactions. By contrast, bank deposits can be used online but do not preserve anonymity. Banks use the information contained in deposit flows to extract rents from merchants in need of financing. Payment tokens issued by digital platforms allow merchants to hide from banks but enable platforms to stifle competition. An independent digital payment instrument (a CBDC) that allows agents to share their payment data with selected parties can overcome all frictions and achieves the efficient allocation. JEL Classification: D82, E42, E58, G21
    Keywords: central bank digital currency, digital platforms, financial intermediation, payments, privacy
    Date: 2022–05
  7. By: Igor Makarov; Antoinette Schoar
    Abstract: The paper provides an overview of cryptocurrencies and decentralized finance. The discussion lays out potential benefits and challenges of the new system and presents a comparison to the traditional system of financial intermediation. Our analysis highlights that while the DeFi architecture might have the potential to reduce transaction costs, similar to the traditional financial system, there are several layers where rents can accumulate due to endogenous constraints to competition. We show that the permissionless and pseudonymous design of DeFi generates challenges for enforcing tax compliance, anti-money laundering laws, and preventing financial malfeasance. We highlight ways to regulate the DeFi system which would preserve a majority of benefits of the underlying blockchain architecture but support accountability and regulatory compliance.
    JEL: G1 G2 G20 G21 G23 G3
    Date: 2022–04
  8. By: Arun Gupta; Horacio Sapriza; Vladimir Yankov
    Abstract: Our paper studies the role of the collateral channel for bank credit using confidential bank-firm-loan data. We estimate that for a 1 percent increase in collateral values, firms pledging real estate collateral experience a 12 basis point higher growth in bank lending with higher sensitivities for more credit constrained firms. Higher real estate values boost firm capital expenditures and lead to lower unemployment and higher employment growth and business creation. Our estimates imply that as much as 37 percent of employment growth over the period from 2013 to 2019 can be attributed to the relaxation of borrowing constraints.
    Keywords: Collateral channel; Firm borrowing constraints; Bank credit allocation; Corporate investment; Macro-finance; Transmission mechanism
    JEL: E44 G21
    Date: 2022–05–10
  9. By: Heider, Florian; Inderst, Roman
    Abstract: This paper examines optimal enviromental policy when external financing is costly for firms. We introduce emission externalities and industry equilibrium in the Holmström and Tirole (1997) model of corporate finance. While a cap-and-trading system optimally governs both firms` abatement activities (internal emission margin) and industry size (external emission margin) when firms have sufficient internal funds, external financing constraints introduce a wedge between these two objectives. When a sector is financially constrained in the aggregate, the optimal cap is strictly above the Pigouvian benchmark and emission allowances should be allocated below market prices. When a sector is not financially constrained in the aggregate, a cap that is below the Pigiouvian benchmark optimally shifts market share to less polluting firms and, moreover, there should be no "grandfathering" of emission allowances. With financial constraints and heterogeneity across firms or sectors, a uniform policy, such as a single cap-and-trade system, is typically not optimal.
    Keywords: pigou tax,financing,climate change
    JEL: O16 L16 H23
    Date: 2021

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