Real Sector Activity Research Articles

Boosting Housing Markets: Amplifying Reserve Requirements for Greater Economic Growth, Insights from China and Indonesia

Boosting Housing Markets: Amplifying Reserve Requirements for Greater Economic Growth, Insights from China and Indonesia

Bibliometric Analysis on Islamic and Conventional Money Demand

The Islamic finance industry in the world has been snowballing in the last ten years. In its implementation, the Islamic financial system does not use an interest rate system but uses a profit-sharing system. The increase in global Islamic financial assets is in line with the theory that states that the profit-sharing system is better than the interest system because the Islamic money demand model, which uses the profit-sharing system, tends to be more resistant to shocks compared to the conventional money demand model which uses the interest system. This research aims to prove the validity of this theory. By using the method of bibliometric, the author found 391 studies that discussed "Islamic and Conventional Money Demand". The results show that there are 5 cluster which have become research paths, namely the Economic Policy Framework and Financial Analysis, Real Sector Activities, Economic Research Matrix, Financial Governance in Dual Banking Systems, and Money Markets.

Reinterpreting Modern Monetary Theory Through an Islamic Lens: Insights from Indonesia's Economic Thought

Modern Monetary Theory (MMT) has gained attention, particularly following the crisis caused by COVID-19, which led every country to experience a significant decline in economic growth. This concept proposes the idea that a central bank can create money to finance real sector activities without having to borrow from specific parties, which is then believed to solve various economic problems. This theory has sparked various disagreements within conventional economics. Therefore, in countries that adopt dual economic systems, they certainly have their own perspectives when considering this monetary theory. This research utilizes library documentation or collected reading sources as data sources. The research findings suggest that the concept of MMT is not in conflict with Islamic Sharia, as the MMT concept aligns with the functions of money described by Al Ghazali and Ibn Khaldun. Hence, the MMT concept is not expected to lead to excessive inflation, as it conforms to the Islamic theory of the function of money, where money serves as a medium of exchange rather than a tradable commodity. With this concept, the quantity of goods in a country will be accompanied by the Money Supply. However, the application of economic theories like MMT must be adapted to the conditions and economic concepts of a given country. Despite MMT's compatibility with Islamic monetary concepts, Indonesia is not yet ready to fully implement MMT, which is why the predicted level of moral hazard risk is higher.

A Macro Econometric Model of Human Capital Development and Activity Sectors Performance in Nigeria

Several studies on human capital development have ignored its effects on activity sectors of the economy in developing countries like Nigeria. This paper examined the effects of human capital development on the Nigerian real sector activity 1981 to 2022 with data from Central Bank of Nigeria’s Statistical Bulletin, and National Bureau of Statistics. This paper utilized a macro-econometric model approach anchored on the endogenous growth theory. Results show that a 1% increase in HCD significantly led to diverse effects on the activity sectors through public spending channel - agricultural output dropped (9.9%), industrial output improved (6.6%) and services sector increased (15%). This implies that human capital development is a significant determinant of agricultural output in Nigeria; however, human capital development does not have significant effect on industrial output, though its relationship with the sector is positive and human capital development is a significant determinant of output in the services sector. This paper recommended among others that the ministry of agriculture should incentivize through that availability of credit facilities and technological innovation so as to make agricultural activities attractive. Keywords: Agriculture, industry, macro econometric modeling, human capital development, Nigeria JEL codes: J43, O25, F14, J24 DOI: 10.7176/DCS/13-3-04 Publication date: March 31 st 2023

AN ECONOMETRIC SIMULATION OF HUMAN CAPITAL DEVELOPMENT AND ACTIVITY SECTOR PRODUCTIVITY IN NIGERIA

Several studies on human capital development have ignored its effects on activity sectors of the economy in developing countries like Nigeria. This paper examined the effects of human capital development on the Nigerian real sector activity 1981 to 2022 with data from Central Bank of Nigeria’s Statistical Bulletin, and National Bureau of Statistics. This paper utilized a macro-econometric model approach anchored on the endogenous growth theory. Ex-ante forecast showed that a 4% increase in life expectancy led to improvement in industry output (50.9%) and service output (16.6%), and agriculture output decreased by 7.4%. 4% decrease in life expectancy improved agricultural output by 14.9% and worsened industry and service sectors’ outputs by 31.2% and 65.9%, respectively. A 2.0% increase in number of schooling years improved service (9.3%) and industry (3.7%) while agriculture output shrunk by 2.0% deviation. A 2% decrease in schooling year’s worsened service and industry output by 74.5% and 42.4%, respectively and improved agriculture output (24.1%). A 7.7% increase in the index of per capita GNI resulted in negative shock to service output (69%) and industry output (37%) and positive deviation of 21.5% in agriculture output. Under the index of per capita GNI decrease of 7.7%, service output deviated by 200%, industry output deviated by 47.7% and agriculture output by -19%. The study therefore recommended that quality education should be made available to all so that Nigeria’s service and industrial sectors can be revolutionized.

Pengaruh Simpanan Anggota dan Pembiayaan terhadap SHU pada KSPPS BMT Sinergi Cendekia Indonesia

The purpose of this study is to describe and analyze the partial and simultaneous influence of member deposits and financing on profit (SHU) on KSPPS BMT Sinergi Cendekia Indonesia. The research approach used is a quantitative approach with descriptive-analytical methods, the data source used is a five-year safe secondary data, the data collection techniques used are library studies and documentation. The data analysis technique used is multiple linear regression analysis. The results showed that partially member deposits did not affect SHU, financing did not affect SHU and simultaneous deposits and financing did not affect SHU. The implication is that the SHU forming component in BMT does not have to be formed from financing activities alone but can be formed from real sector activities and partnerships between BMT as developed by KSPPS BMT Sinergi Cendekia Indonesia.

The Mudharabah Implementation in Correlation Context Time Deposit

Islamic banks have the function of collecting funds from customers and channeling funds for real sector activities. One of the legal bases used is Mudarabah. Mudharabah is used as a legal basis for Mudharabah Deposit products which have the aim of collecting customer funds and channeling them into the form of Mudharabah Financing. Both products are offered with a profit sharing system. In Mudharabah Deposits, the customer is a shahibul maal who will get a ratio according to the profit from the Bank. In Mudharabah Financing, the Bank as shahibul maal will get a ratio according to the profit of the Mudharib. Observing further the suitability of Islamic Bank products, especially Mudharabah Deposits and Mudharabah Financing, with the Mudharabah system in the fiqh literature, a sharia study of these products is compiled which is poured into this scientific paper.

The Mudharabah Implementation in Correlation Context Time Deposit

Islamic banks have the function of collecting funds from customers and channeling funds for real sector activities. One of the legal bases used is Mudarabah. Mudharabah is used as a legal basis for Mudharabah Deposit products which have the aim of collecting customer funds and channeling them into the form of Mudharabah Financing. Both products are offered with a profit sharing system. In Mudharabah Deposits, the customer is a shahibul maal who will get a ratio according to the profit from the Bank. In Mudharabah Financing, the Bank as shahibul maal will get a ratio according to the profit of the Mudharib. Observing further the suitability of Islamic Bank products, especially Mudharabah Deposits and Mudharabah Financing, with the Mudharabah system in the fiqh literature, a sharia study of these products is compiled which is poured into this scientific paper.

Twin Deficits Hypothesis as an Indication of Government Failure in Sierra Leone: An Empirical Investigation (1980-2018)

This paper examines the assertion of twin deficit hypothesis as an indication of government (policy) failure in Sierra Leone through the utilisation of relevant variables from 1980 – 2018. The paper is considered very important, with its application to the economy of Sierra Leone, which seems to have battled with structural problems, particularly policy failures, as manifested through over-burdened current account and fiscal deficit, which is presently overshadowing efforts of changedregime to make headway with planned developmental goals. Theoretical and empirical literature was reviewed in relation to the twin deficit hypothesis. Empirical outcome using the Fully Modified Ordinary Least Squares (FMOLS) failed to reject the twin deficit hypothesis; an indication that fiscal deficit is partly responsible for the negative current account position in Sierra Leone. Evidence from the outcome is consistent with expectation for a small open economy [Sierra Leone], burdened with failed institutional governance policies in areas connected with unproductive real sector and high lending rates, considered as disincentive to private sector investments. To address the problem, policy recommendations have been proposed, pointing to a boost in real sector activities – this will help facilitate growth and mobilisation drive to improve domestic revenue collection, also channelled through the Treasury Single Account (TSA) for effective monitoring. Conscious efforts should be made to stepup operations that deter corruption, while firming up efforts to to boost exports through competitive business operations.

Membangun Model Perbankan Syariah yang Transparan, Akuntanbel, Responsibility, Independensi dan Fairness Perspektif Pengetahuan (Survey Pada Perbankan Syariah di Propinsi Jambi)

Jambi Province is one of the provinces with the largest Muslim population in Indonesia, with such a large population, Jambi Province should have been a pioneer and direction for the development of Islamic banking and finance in Indonesia. Nevertheless, the contribution of sharia business is still very low compared to conventional business, in 2016 the sharia banking market share is still less than 5%. For the development of sharia banking in the future, the specificity of the application of sharia principles in totality, demanding products and contracts of Islamic banking must have a link with real sector activities. This is where an understanding of governance and a professional business model and the aspects of muamalat fiqh are needed. Islamic banking as a modern banking needs to be managed with the principles of modern governance, which are in accordance with sharia principles, for this reason, this study tries to uncover and analyze how the model of sharia corporate governance implementation in sharia financial institutions. This study aims to explore the model of disclosure mechanism of sharia banking corporate governance in Jambi Province. The sample banks in the study consisted of 7 Islamic banks in Jambi Province. Research is done by using Qualitative Methods. Data analysis is done using the content analysis method. The results of the study show that for 2016, the sharia banking model that is transparent, accountable, responsive, independent and fairness analyzed can be grouped into four aspects, namely the regulatory aspects, organizational structure, process aspects and functions. From the aspects analyzed, it can be concluded that the Islamic commercial banks in implementing their governance show that bank management has implemented the principles of governance fairly well, in accordance with the provisions of the applicable legislation. And there are still significant weaknesses in the application of its sharia governance structure model. The sharia governance model that is built is to produce a sharia banking model that is transparent, accountable, responsible, independent and fairness that is applied in Jambi Province at the same time as the provisions that apply to sharia banking internationally.

Connecting financialization and urbanization: the changing financial ecology of urban infrastructure in the UK

ABSTRACTThis paper discusses a conceptual model for critically engaging with the effects of financialization on contemporary cities. The current state of theory on financialization in the urban context focuses foremost on the real estate sector activities, regulatory frameworks and governance structures that enable urban financialization. The paper addresses the calls for a closer examination of the spatial patterns that emerge from these practices. By combining financial ecologies as an analytical tool with infrastructure as a perspective, it provides a conceptual model in order to understand the impacts of financialization on cities. The paper discusses the conceptual model in the context of the introduction of the UK Municipal Bonds Agency. It concludes by outlining some of the spatial effects of the UK’s changing financial ecology of urban infrastructure.

E-MONEY (UANG ELEKTRONIK) DALAM PERSPEKTIF HUKUM SYARI’AH

E-Money / Uang Elektronik adalah alat pembayaran yang diterbitkan atas dasar nilai uang yang disetorkan telebih dahulu oleh pemegang kepada penerbit. Kemudian uang tersebut disimpan secara elektronik dalam suatu media uang elektronik yang dapat digunakan sebagai alat pembayaran kepada pedagang dan bukan penerbit. Metode yang digunakan dalam penelitian ini adalah metode kualitatif, dimaksud sebagai metode penelitian yang temuantemuannya tidak diperoleh melalui prosedur statistika atau bentuk hitungan lainnya. Pendekatan penelitian yang dilakukan menggunakan pendekatan kualitatif normatif, yaitu dengan cara yangdigunakan dalam penelitian hukum yang dilakukan dengan cara meneliti bahan pustaka yang ada. Dalam penelitian ini diketahui bahwa penggunaan uang elektronik berpengaruh positif terhadap pengeluaran konsumsi masyarakat. Hasil tersebut sejalan dengan teori yang dikemukakan oleh Dias (2001) ditinjau dari segi makroekonomi, adanya penggunaan uang elektronik (e-money) akan mendorong konsumsi dan permintaan masyarakat terhadap barang dan jasa yang pada gilirannya berpotensi mendorong aktivitas sektor riil. E-Money / Electronic Money is a means of payment issued on the basis of the value of money deposited in advance by the holder to the issuer. Then the money is stored electronically in an electronic money medium that can be used as a means of payment to traders and nonpublishers. The method used in this study is a qualitative method, referred to as a research method whose findings are not obtained through statistical procedures or other forms of calculation. The research approach is carried out using a normative qualitative approach, namely by means of being used in legal research conducted by examining existing library materials. In this study it is known that the use of electronic money has a positive effect on public consumption expenditure. These results are in line with the theory put forward by Dias (2001) in terms of macroeconomics, the use of electronic money (e-money) will encourage public consumption and demand for goods and services which in turn has the potential to encouragereal sector activity.

PENILAIAN KUALITAS KINERJA KEUANGAN PERUSAHAAN PERBANKAN ANTARA SEBELUM DAN SESUDAH MERGER STUDI KASUS PADA PT. BANK MANDIRI, Tbk

This study aims to find differences on the Bank's financial performance before and after the merger as well as assessing how the development of the bank’s performance after the merger. This analysis uses CAMEL (Capital, Asset Quality, Management, Earnings, Liquidity) as an analytical tool as one uses by Bank Indonesia in assessing the performance of a bank. One of the restructuring is done by mergering four state banks into one bank, Bank Mandiri. By the merger, the government hoped to be able to operate efficiently as a financial intermediary in supporting the real sector activities in Indonesia. Prior to the merger, the four banks had negative capital. It is because the number of their PPAP were smaller than the standard at the amount of 50%. Because of this negative equity, the government, through Bank Indonesia initiated to recapitalize the four banks by doing the merger. It was intended to increase the bank's capital. The policy was also done due to the bad CAR ratio as the primary measurement of bank soundness as required by Bank Indonesia. Along with these efforts the ratio was increasing sharply from -219.51% in 1999 to 295.67% in the year of 2000. It showed that there was a health improvement of the banks, after the merger.Keywords: mergers, banks, CAMEL

Assessment of the monetary policy transmission mechanism in the new EU member states

In order to completely understand and analyse the transmission mechanism, it is necessary to observe all factors conditioning its overall efficiency as well as the efficiency of individual transmission channels. This paper focuses on countries that have successfully passed the transition period and have experience with implementing different monetary policy regimes. The evolution of monetary policy resulted in the development of instruments through which central banks influence the real sector activity by means of a transmission mechanism. The empirical analysis based on econometric tools investigates the efficiency of transmission mechanism channels, or more precisely, their significance in the monetary targeting regime. With a view to reaching the conclusion about the direction in which it is necessary to develop the structure of the real and financial sector, aimed at a better functioning of monetary policy instruments, the paper features a theoretical analysis of the characteristics of the monetary policy in the developed economies, as well as the structural characteristics of these economies.

Economic Policies in India for Stimulation or Austerity and Volatility?

A major reason for the recurrent episodes of financial instability is the predominance of interest-based debt and leveraging. Financial stability is achievable through risk sharing finance instead of risk shifting that characterizes contemporary finance. A risk sharing system serves the true function of finance as facilitator of real sector activities and avoids the emergence of a “paper economy” where there is gradual decoupling of finance from the real sector. Islamic finance was initially proposed as a profit-loss sharing system, but its core principle is risk sharing. In prohibiting interest-based debt instruments, Islam grounds finance on a strong risk sharing footing. Although still a young industry that has come a long way, it has not managed to develop truly risk-sharing instruments that would allow individuals, households, and firms as well as whole economies to mitigate systematic and un-systematic risks. It is suggested that governments should intervene and issue macro-market instruments to provide their treasuries with a significant source of non-interest rate based financing while promoting risk sharing. Moreover, given that evidence across the world suggests that monetary policy’s transmission mechanism may be impaired, it is suggested that these government issued securities could also impart added potency to monetary policy.

Risk Sharing, Public Policy and the Contribution of Islamic Finance

A major reason for the recurrent episodes of financial instability is the predominance of interest-based debt and leveraging. Financial stability is achievable through risk sharing finance instead of risk shifting that characterizes contemporary finance. A risk sharing system serves the true function of finance as facilitator of real sector activities and avoids the emergence of a “paper economy” where there is gradual decoupling of finance from the real sector. Islamic finance was initially proposed as a profit-loss sharing system, but its core principle is risk sharing. In prohibiting interest-based debt instruments, Islam grounds finance on a strong risk sharing footing. Although still a young industry that has come a long way, it has not managed to develop truly risk-sharing instruments that would allow individuals, households, and firms as well as whole economies to mitigate systematic and un-systematic risks. It is suggested that governments should intervene and issue macro-market instruments to provide their treasuries with a significant source of non-interest rate based financing while promoting risk sharing. Moreover, given that evidence across the world suggests that monetary policy’s transmission mechanism may be impaired, it is suggested that these government issued securities could also impart added potency to monetary policy.

Risk sharing, public policy and the contribution of Islamic finance

A major reason for the recurrent episodes of financial instability is the predominance of interest-based debt and leveraging. Financial stability is achievable through risk sharing finance instead of risk shifting that characterizes contemporary finance. A risk sharing system serves the true function of finance as facilitator of real sector activities and avoids the emergence of a “paper economy” where there is gradual decoupling of finance from the real sector. Islamic finance was initially proposed as a profit-loss sharing system, but its core principle is risk sharing. In prohibiting interest-based debt instruments, Islam grounds finance on a strong risk sharing footing. Although still a young industry that has come a long way, it has not managed to develop truly risk-sharing instruments that would allow individuals, households, and firms as well as whole economies to mitigate systematic and un-systematic risks. It is suggested that governments should intervene and issue macro-market instruments to provide their treasuries with a significant source of non-interest rate based financing while promoting risk sharing. Moreover, given that evidence across the world suggests that monetary policy’s transmission mechanism may be impaired, it is suggested that these government issued securities could also impart added potency to monetary policy. JEL Codes: P43, P4, E2 Keywords: Risk sharing, Macro-market securities, Islamic finance, Government policy

Debt and Economic Acitivity

Many nations, rich and poor alike, are reeling under mountains of interest-based debt. What are the effects of large and growing debts on economic activity? It is widely believed that borrowing helps the economy to grow faster. However, a number of recent studies have shown that, beyond a certain threshold, large levels of debt in fact slow down economic activity rather than stimulate it. It appears that in some countries this threshold has already been passed. Others are coming dangerously close to it. Reduced or negative rate of growth makes it harder to repay existing debts. Social unrest has taken place in a number of countries as governments channel increasing amounts of limited tax revenues towards the repayment of debt with interest to creditors. A more effective way to respond to the debt crisis is to adopt bona fide Islamic financing. In such a system there is no room for earning interest income by lending. Active participation in the real sector is required. Participation in real sector activity is rewarded by incentives in the form of profits, rents, and wages.

Debt and Economic Activity

Many nations, rich and poor alike, are reeling under mountains of interest-based debt. What are the effects of large and growing debts on economic activity? It is widely believed that borrowing helps the economy to grow faster. However, a number of recent studies have shown that, beyond a certain threshold, large levels of debt in fact slow down economic activity rather than stimulate it. It appears that in some countries this threshold has already been passed. Others are coming dangerously close to it. Reduced or negative rate of growth makes it harder to repay existing debts. Social unrest has taken place in a number of countries as governments channel increasing amounts of limited tax revenues towards the repayment of debt with interest to creditors. A more effective way to respond to the debt crisis is to adopt bona fide Islamic financing. In such a system there is no room for earning interest income by lending. Active participation in the real sector is required. Participation in real sector activity is rewarded by incentives in the form of profits, rents, and wages.

Price Stability and the Growth Maximizing Rate of Inflation for Ghana

Monetary policy in Ghana, which is typical of many central banks, over the years, has focused on ensuring price stability or low inflation. The aim of the policy of price stability is to provide a stable environment for real sector activities to flourish. However, the outcome of the policy on real sector activities has not been subjected to any empirical investigation and this forms the focus of the study. For instance, the Central Bank has focused on single digit inflation and whether such a low rate is growth maximizing is yet to be ascertained. The study therefore investigates the revenue maximizing and the ‘growth maximizing’ rate of inflation for Ghana using data from Bank of Ghana and WDI. The study finds that economic performance is higher under low inflation era than when inflation is high. It also established the revenue maximizing rate of inflation using the Laffer curve approach is lower than the growth maximizing rate of inflation. Also, from the results, it can be deduced that the single digit inflation target set by the Central bank is not growth maximizing.