Macroeconomic Perspective Research Articles

The Fourth Market theory and interest rate benchmarking in the Islamic finance industry

Purpose This paper aims to understand the issue of interest rate benchmarking in Islamic financial institutions (IFIs) from a macro-economic perspective and assessing the relevance of creating a Sharīʿah-compliant profit rate benchmark to solve this issue. This paper also aims at suggesting an Islamic alternative that will handle both the negative economic impact on IFIs as well as on their financial performance. Design/methodology/approach The paper is based on literature review of conventional finance and Islamic finance theories to construct a theoretical model to assess the impact of interest rate benchmarking on the ability of IFIs to achieve the objectives of the Islamic economy. Findings The macro-economic perspective concludes that conceiving a profit rate benchmark for the Islamic finance industry is not relevant to raising the Sharīʿah credibility of the industry. Indeed, several adjustments need to be introduced in terms of the business model. Research limitations/implications The recommendations of this paper require the involvement of financial authorities and governments for their implementation. Indeed, the adjustments require a macro-economic review. Practical implications The paper considers a profit rate benchmark irrelevant and inefficient. Instead, it suggests the necessary adjustments in terms of business model and economic approach for IFIs to achieve their objectives. Social implications The paper considers zakat implementation and the adjustment of IFIs as the real path to implement a fair wealth distribution in the society. Originality/value The creation of a profit rate benchmark has always been the only solution for the pricing issue in IFIs. This paper challenges this idea and tries to give a deeper understanding of the situation.

Economics, Self-Awareness and Self-Mastery: a proposed Framework

Il COVID-19 non ha solo causato diffusi disagi emotivi sotto forma di paura, depressione e ansia, ma ha anche generato una crisi economica globale. Se la maggior parte di noi potrebbe interpretare la parola "economia" da una prospettiva macroeconomica, come definita da Adam Smith (1904), però altri eminenti autori e studiosi, come spiegato nel contributo, ne hanno adottato una definizione centrata sulla persona. Nel presentare entrambi gli approcci, il contributo adotterà le definizioni di economie centrate sulla persona e le amplierà introducendo un nuovo Framework, chiamato Self-Science, per facilitare la comprensione delle componenti legate al self-awareness con lo scopo di perseguire e perfezionare il self-mastery.

Energy-food nexus in the marine environment: A macroeconomic analysis on offshore wind energy and seafood production in Scotland

The rapid development of offshore wind farms (OWFs) has stimulated debate about its overall socioeconomic impacts. Expanding the scale of OWFs increases the availability and affordability of electricity but could displace existing fishing activities and reduce food supply. To evaluate these impacts from a macroeconomic perspective, a computable general equilibrium (CGE) model is developed, using Scotland as a case study. A particular focus is placed on the disaggregated electricity and seafood sectors, their interconnectedness from an energy-food nexus perspective, and the distributional effects across household groups. This paper explores, from macroeconomic perspective, the trade-offs in the energy-food nexus between expanding OWFs and the seafood sectors, together with the impacts on food and energy security. The results suggest that, through economic linkages, increasing the number of OWFs would have a negative, but limited, effect on seafood production sectors. However, the falling cost of electricity from OWFs would have a positive impact on the economy overall and benefit lower income households, contributing to a reduction in fuel poverty. The model results raise the awareness of nexus linkages between OWFs and seafood production and are applicable to policies involving the development of other offshore renewables.

Understanding latent drivers of firm behaviour: A new methodological approach applied to agents’ company visit scores

This paper proposes the use of structural equation modelling (SEM) in analysing the latent drivers of firm behaviour. We first develop a conceptual framework that hypothesizes a causal ordering related to the antecedents and consequences of profitability changes as perceived by firms. Next, we show how these constructs can be operationalized through company visit scores assigned by Bank of England Agents. The relative importance of the structural coefficients estimated using the partial least squares SEM algorithm reveals that a change in the perceived profitability of UK firms mainly manifests in the intention to change their pricing policies. However, our results also indicate a significant incentive to adjust production technologies. Regarding the antecedents of perceived profitability, the most important determinant is a success variable that captures firms’ power to pass on their capacity and cost pressures to prices. Our results are promising: SEM can be applied to gain deeper insight into firms’ complex decision-making processes and interpret the information content of meetings with individual firms from a macroeconomic perspective.

Social Trust and Dynamics of Capitalist Economies in the Context of Clashing Managerial Factors with Risks and Severe Turbulence: A Conceptual Inquiry

Nowadays, in the context of a complex fragility that radically transforms the economic habitat, the cyclical evolution of the economy is governed by new rules and constraints that transcend the economic area and increasingly interfere with the socio-cultural features of life. In this context, the aim of this paper is to outline the conceptual domain of a new insight into the relationship between social and economic dimensions of life by summarizing and integrating two of the main groundbreaking and inspirational streams of thought—social trust and economic dynamics. To do so, we developed theoretical syntheses of the most important contributions documenting the nature of trust and business cycle; then, the much more recent ”niche” of the influence between them was placed under conceptual discussion. One of the more significant findings to emerge from this study is that the nature of the relationship between social trust and economic dynamics is still minimally explored and understood, and the research conducted thus far is mainly positioned in a macroeconomic perspective, combining quantitative and qualitative approaches that still leave many questions unanswered. However, the lack of a deep understanding of these influences launches new challenges for theoretical developments and creates the framework for an integrative understanding. These new insights can support more rigorous studies whose results could be of utmost importance for business organizations in addressing the problem of business sustainability, but also for economic decision-makers. At the macro level, economic crises are influencing the income distribution and are expected to exacerbate poverty, thus affecting progress towards Sustainable Development Goal 01 (No poverty).

Business, Economics, and Theology: Working for the Holistic Flourishing of CreationBudgeting for A Healthy Church: Aligning Finances with Biblical Priorities for Ministry, Jamie Dunlop, Zondervan, 2019 (ISBN 978‐0‐310‐09386‐2), 176 pp., pb $14.99The Economics of Neighborly Love: Investing in Your Community's Compassion and Capacity, TomNelson, IVP, 2017 (ISBN 978‐0‐8308‐4392‐3), x + 222 pp., pb $16A Catholic Spirituality for Business: The Logic

AbstractHow does one practice the Christian faith commitment through financial management or business? The three books in this review respond to this question from three perspectives: from a macroeconomic perspective, the perspective of pastoral ministry within a Christian church, and the perspective of working within more pluralistic and non‐sectarian organizations. This piece focuses on three key takeaways from the books: first, all three argue for a proper use of resources in a way that cares for the well‐being of creation, especially the most marginalized, while also giving concrete principles to reflect on and apply depending on the context one finds themselves in. Second, all three also discuss the importance of both individual effort and structural change. Lastly, all three books offer some insight into handling conflict in decision making in organizations.

Financial conditions, financial constraints and investment-cash flow sensitivity: evidence from Saudi Arabia

PurposeThe purpose of this paper is to examine whether the sensitivity of investment to cash flow varies with exogenous financial conditions.Design/methodology/approachA dynamic model of investment based on the Euler equation approach is employed to investigate the impact of macro-financial factors on the sensitivity of investment to cash flow. The sample comprises data from 84 non-financial firms listed on Saudi stock market over the period 2007–2018.FindingsThe results show that the sensitivity of investment to cash flow is positive, implying the presence of financing constraints for Saudi firms. Evidence also reveals that better financial conditions relax firms' financing constraints. However, contractionary monetary policy, poor financial development and liquidity crisis strengthen the dependence of firms on internally generated funds when undertaking new investment projects.Practical implicationsThe empirical results have useful policy implications. First, policymakers should pay attention to the importance of policymaking based on the monetary demand of microeconomic entities. In monetary contraction periods, firms face greater challenges in accessing external finance. These firms are likely to experience under-investment which at a macro level would translate into lower investments and economic growth for the country. Second, policymakers are encouraged to implement complementary measures that, coupled with existing financial reforms, may promote efficiency, competitiveness and transparency in firms' operations. Finally, managers and investors should consider financial structure and condition as important factors in their investment decision.Originality/valueThis study extends previous research by investigating whether the widely reported positive investment and cash flow relationship can be observed using data from an emerging market, specifically Saudi Arabia. It also sheds light on the investment-cash flow debate under a macroeconomic perspective and provides further evidence on the impact of financial crisis on the investment-cash flow (ICF) sensitivity.

TERRORISM AND INTERNATIONAL TOURISM NEXUS: EVIDENCE FROM PAKISTAN

The association among terrorism and tourism is crucial from the macroeconomic perspective as tourism is considered as a vital sector regarding developmental impacts. This analysis conducted to extract the influence of terrorism on tourism in Pakistan, expending the latest dataset and incorporating some additional factors like FDI, human capital, and economic growth for 1980-2016, using ARDL bounds test. The evidence shows that terrorism has an inverse relationship with tourism in the long run that is statistically significant. Economic growth, FDI, and human capital are the increasing factors of tourism. Terrorism may cause to create insecurity and devastating recreational places. There is a need to resolve the issue of terrorism to enhance tourism in Pakistan. It may help tourist authorities to understand the nature of the impact of terrorism on the tourism industry in Pakistan.Keywords: Terrorism, Tourism, ARDL, Human Capital, Economic GrowthJEL Classifications: L83, Z32, J24, F43DOI: https://doi.org/10.32479/ijefi.10674

The Role and Impact of International Financial Reporting Standards on Cross-Border Financing for a Systemically Important Bank from Macroeconomic Perspectives—Technical Review Research Study

The author of the study note that the extensiveness of a country’s international accounting disclosure requirements is a good for the overall disclosure extensiveness of the exchange in that foreign country, which, in turn, is bigly correlated with the cost of listing such as United States, Canada, United Kingdom, The Netherlands, France, Japan, and Germany. The United States and the national over-the-counter market have enjoyed significant growth in foreign listing. In absolute terms, the U.S. numbers are even more impressive. As of December 2019, the 1,420 foreign companies whose shares are traded in the United States reparent the largest amount of foreign listings of any major stock exchange in the world., which reflects, at least in part, recognition by multinational entities that the U.S. securities market represents the most efficient market in the world, thus translating into a lower cost of capital for issuer of securities. This technical research review article may support both the public trade companies and policymakers around the World.

Effectivity of Progressive Taxation from the Micro- and Macroeconomic Perspective

Abstract Many empiric analyses on the topic of the progression exist and despite their often contradictory results governments still include their conclusions in to their tax policies. Many questions arise in relation to the issue: What is the theoretical justification of progressive taxation? What are the effects of the progression from the microeconomic and macroeconomic perspectives? Which conditions should be met in the real-world for progressive taxation to be effective? The purpose of the article is to find the answers to these questions. We aim to identify a set of requirements that shall be observed if the efficiency of progressive taxation in real conditions is the goal. We conclude that the taxation as a built-in stabilizer have an impact on economic stability under certain conditions. We described the mechanism of how the taxation act in the counter-cyclic and pro-social way and we defined the factors which influence the efficiency of progressive taxation in the real economy.

FACTORS INFLUENCING THE EFFECTIVE CAPTURE OF INDIRECT COSTS IN ACCIDENT REPORTS BY EMERGING CONSTRUCTION CONTRACTORS IN SOUTH AFRICA

There has been limited research into the indirect cost of accidents in the South African construction industry, despite its consequences on productivity and performance measurement and management. Extant studies have attempted to explore the impact of direct and indirect costs from a macro-economic (industry-wide) perspective. Whilst a few have focused on the micro-economic impacts, with specific emphasis on the organizational level, most of these studies have concentrated on the construction client perspective without recourse to the experiences for construction contractors. This is the gap which this study seeks to fulfil within the South Africa. To achieve this objective, a document analysis of selected construction accident reports was conducted using a pre-set theme identified from the literature in extracting information from the emerging contractors ‘accident reports. It was revealed that none of the reports were compliant as per the pre-set theme used. The reasons behind the non-compliance were sought for, through another round of data collection deploying semi-structured interview and questionnaire surveys. A population of contractors within CIDB grades 5-7 were interviewed and surveyed. Survey results revealed that difficulties in extracting the information top the list, followed by organisational will. Also, areas for improvement in capturing the accident report were highlighted such as; making it as a policy for any accident report to capture indirect cost and assigning timeliness on when the data must be captured in any accidents is paramount. This finding has implications on the emerging contractors as it provides information on factors that negate and impact on sustainability of the emerging contractors as it relates to OHS performance and competitiveness.

Poverty Gaps and Gaps in Theory: A Note on “Dynamising” Small Firms

The present note concerns the macro-development perspective underlying new experimental research programme to study poverty. In the perspective, the focus on poverty relates to poverty gaps, an understanding that makes clear poverty is something to do with employment status that remains miles away from state-of-the-art employment status that comes with work technological choices embodied in advanced growth process. This understanding also says that narrowing the gap would add to innovations and growth that adds to profit augmentation—a powerful motive that guides market economies. The present note argues that this focus on solutions to poverty-related employment relates to a policy focus on possible dynamism of small firms and innovation nexus, and if so, there are alternative Keynesian macroeconomic perspective on the processes and innovations that paces advanced growth and how small firms can relate to them.

Measuring financial knowledge: a macroeconomic perspective

Building an indicator which measures countries’ financial knowledge allowing comparisons between them and throughout time is the objective of this paper. Currently, this is a lack in this research field, whose previous works were oriented to microeconomic analysis using survey that not only covered interviewees’ financial knowledge but also some of their individual characteristics (e.g. race, ethnic, gender, age, among others). Perhaps that is why there is empirical evidence about the effect of this knowledge on matters such as saving and retirement planning, stock market participation, product and services choice, or over-indebtedness, for example. But its effects on economic variables like development and inequality (among others) have hardly been explored. Therefore, the longitudinal design of our Financial Knowledge Index might contribute to turn definitively towards the macroeconomic perspective in this incipient research field. Our results are consistent with previous works and reveal those countries which have more robust and more mature financial system (some of them have financial matters in their school curricula) register better positions respect with the rest of them.

IMPACT OF TERRORISM ON ECONOMIC GROWTH IN SOUTH ASIAN COUNTRY

The association among terrorism and economic growth is crucial from macroeconomics perspective. This analysis is carried out to extract the influence of terrorism on economic growth in Pakistan, incorporating trade, foreign aid and capital for the period of 1981 to 2016. This study applied ARDL bounds testing to inquire the problem and found a co-integration nexus among the used macroeconomic indicators. The evidence shows that terrorism has an inverse relationship with economic growth that is statistically significant. Terrorism may cause to create insecurity and devastating recreational places. There is need to resolve the issue of terrorism to enhance the ability of other economic indicators which cause to enhance the growth of Pakistan.Keywords: Terrorism, Trade, Foreign Aid, ARDLJEL Classifications: F14, F43DOI: https://doi.org/10.32479/ijefi.9699

Investigating the link between remittances and inflation: evidence from the Philippines

ABSTRACT From a macroeconomic perspective, scholarly literature has established that remittances are inflationary because they fuel higher consumer spending through increased income. However, from the perspective of household decision-making, remittances can taper consumption variations and soften inflationary pressures. In this study, we probe whether rising inflation in remittance-recipient economies triggers the sending of remittances. In evaluating the impact of inflation in the Philippines, we found that increases in inflation can prompt the sending of more remittances from migrant relatives in the short run. More than the anticipation of remittances during inflationary periods, it was shown that remittances are not necessarily inflationary. There were other more dominant internal factors that can stimulate inflationary pressures. Thus, the usual arguments that remittances contribute to economic instability still warrant further investigations.

Vineyards’ restructuring and conversion through national support programmes - the case of Romania

Wine industry is considered to be a traditional industry, where the potential for growth is still important for the existing wine producers and new entrants, based on strategies for increasing international awareness, technological innovation and financing program. The paper aims to explore the evolution of the determinants of wine and vineyards industry from a macroeconomic perspective, in order to assess the efficiency of the National Support Programmes, financed by the European Union. The exploration intends to cover the tendency of the following indicators: areas under vines, areas under vines for wines, wine producers, wine consumers, wine imports and wine exports, in order to explore new opportunities for growth and develop future orientation. Moreover, the analysis intends to address the importance of National Support Programmes 2009-2013; 2014-2018; 2019-2023, whose evolution is currently considered a key research question in the field. Romania is an important European country from the point of view of wine industry, the various wines it produces are known for their quality. With an area of around 180.000 ha cultivated with vines which, in 2016, represented 1,42% of its agricultural area and 2,28% of arable area, Romania ranks the 5th position in the European Union, after Spain, Italy, France and Portugal. However, the countries that took advantage of the financial funds allocated to the National Support Programmes, were: Italy, Spain and France, which together spent more than 70% of the total amount for each of these programmes.

The Macroeconomic Costs of Conflict

Macroeconomic costs of conflict are generally very large, with GDP per capita about 28 percent lower ten years after conflict onset. This is overwhelmingly driven by private consumption, which falls by 25 percent ten years after conflict onset. Conflict is also associated with dramatic declines in official trade, with exports (imports) estimated to be 58 (34) percent lower ten years after conflict onset. The onset of conflict often also induces significant refugee outflows to neighboring non-advanced countries in the short run, and relatively small but very persistent refugee outflows to advanced countries over the long run. Finally, we stress that conflict should be defined in terms of the number of people killed relative to the total population. The traditional definition of conflict—based on the absolute number of deaths—skews the sample toward low-intensity conflicts in large countries, thereby understating the negative effects of conflict from a macroeconomic perspective.

Capacity Building of the Trade Bodies to Boost Private Sector Development

According to the Global Wealth Report 2019, the amount of global aggregate wealth is USD 360.6 trillion, which means per capita wealth is USD 70,850 and each living adult is supposed to have USD 70,850 of his own. Nobody should be poor; no hunger should be there around the world. But the reality is only 1% people own 45% wealth of the world and the top 10% people owns 82% of the global wealth. From macroeconomic perspective, the 16 wealthiest countries own the maximum wealth of this planet. This uneven distribution of wealth is not happening deliberately, there are many reasons for that. Social scientists, policy makers, government and development partners are trying to reduce this disparity and make a poverty-free, hunger-free world for us. To achieve this objective poverty alleviation is the number one target. This single target cannot be achieved by a single stakeholder i.e. government, private sector, development partners etc. United effort of all the stakeholders is required to achieve it. Private sector development is the easiest option to alleviate poverty and reduce social disparity. Making everyone economically rich is not possible but ensuring livelihoods and economic empowerment for all is essentially an achievable target. A country is developed when its private sector is developed. Economic development is essential for social security, safety net, better standard of living, good governance so on and so forth. Private sector development is also the number one objective of the government. Government is trying to formulate pro-private sector policies and facilitate private sector participation in decision making.

Revisiting Feldstein–Horioka Puzzle: Evidence from SAARC Economies

In the macroeconomic perspective, domestic saving and investment constitute two important wheels that keep the growth process moving on towards stability. But when domestic savings tend to fly away to foreign countries for excess returns, the warranted domestic investment remains unattained thereby which impair the growth trend unless the gap is bridged by the foreign investment inflows. However, excess inflows of foreign investments may deteriorate current account balances, if not appropriately absorbed. In this pretext, this article revisited the Feldstein–Horioka puzzle with the twin-deficit hypothesis for SAARC countries. The results lend to support the validity of the twin-deficit hypothesis along with a low degree of association between domestic savings and investment in the region thereby justifying the argument that international capital movements or financial integration have increased in the post-reform era. This observation has significant policy implications for the sustained growth of the SAARC nations.

Inflation Targets Regime and global financial cycle: An assessment for the Brazilian economy

In light of the global financial cycle (GFC), this paper investigates the effectiveness of monetary policy in Brazil since the adoption of the inflation targeting regime. The theoretical section analyses monetary policy from the New Macroeconomic Consensus perspective, emphasizing the implications of the GFC. It also contrasts central bank theory with the post-Keynesian critique. For the empirical investigation, a Markov-switching vector autoregressive model is estimated from January 2000 to December 2017, combining the common variables from the empirical literature with the proxy for the GFC. The main results suggest that greater financial instability has a direct effect on domestic inflation . JEL codes : C14, E12, E42