This paper aims to investigate the macroeconomic effects of Qard-al-Hasan (QH) as a tool of monetary policy (MP) and its effectiveness in achieving full employment and price…
Abstract
Purpose
This paper aims to investigate the macroeconomic effects of Qard-al-Hasan (QH) as a tool of monetary policy (MP) and its effectiveness in achieving full employment and price stability in the economy.
Design/methodology/approach
QH-based MP and its effects on major macroeconomic variables are examined on theoretical ground by using the standard aggregate output and aggregate expenditure model within the framework of Islamic economic principles.
Findings
QH-based MP positively influences real sectors of the economy and increases output, and the economy returns to full employment. QH provides the lowest possible borrowing costs across the economy and thus triggers rightward shift in aggregate supply curve and thus increases output and lowers price level. In addition, increase in output eliminates excess demand or shortages and thus maintains price stability. Furthermore, QH-based MP also increases exportable surplus and exports, decreases imports as well as increases inflow of funds and foreign currency reserves with the Central Bank and thus makes MP more effective.
Research limitations/implications
QH-based MP is usually expansionary MP, and as such, it can be argued that there is a probability that QH-based MP may lead to higher inflation rate. However, in this study, it has been shown with real world data in Table II, that 23 countries in Group 1 have pursued zero or negative interest rate policy and their experiences mitigate such probability.
Originality/value
This is, perhaps, the first paper that presents a complete model of QH as a tool of MP with fully explained transmission mechanism. This is new contribution in the literature of Islamic finance where theoretical model on QH is systematically developed and applied as an effective tool of MP in attaining full employment and price stability. This model of QH-based MP can unfold a new horizon of uninterrupted economic growth, full employment and price stability by increasing output and employment, as well as by eliminating excess demand or shortages.
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This paper aims to explore Istisna’a as a tool of monetary policy (MP) and examines its effectiveness in achieving full employment income and price stability.
Abstract
Purpose
This paper aims to explore Istisna’a as a tool of monetary policy (MP) and examines its effectiveness in achieving full employment income and price stability.
Design/methodology/approach
This paper uses Istisna’a as a tool of MP and examines its effects on key macroeconomic variables on purely theoretical ground. The effectiveness and the impact of Istisna’a-based MP is examined by using aggregate output and aggregate expenditure model, embedded with Islamic economic principles, including zakat function.
Findings
Istisna’a-based MP immediately creates well paid jobs, positively contributes and expands the size of the manufacturing sector, increases capital per person employed, labor productivity and thus increases output, employment and promotes industrialization. Increase in the size of manufacturing sector will not only increase manufactured value-added exports but also cut high valued manufactured imports and thus increases positive trade balance and eventually reduces trade deficits. Increase in labor productivity will improve the standard of living, and eventually the economy will yield sustainable high growth rates, full employment and prosperity.
Originality/value
This is probably one of the first attempt to systematically develop the Istisna’a-based MP with detailed MP transmission mechanism. This new contribution in the field of Islamic MP will unveil the horizon of sustainable economic growth, creation of well paid jobs, expansion of manufacturing sector, rapid industrialization and the increase in capital per person employed across the economy, and eventually Istisna’a-based MP will be one of the most effective tool of MP for transforming an economy into a relatively higher and sophisticated stages which will eventually promote sustainable development.
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This paper aims to investigate the effects of eliminating Riba in foreign currency transactions. Riba or interest arises when foreign currencies are bought and sold at different…
Abstract
Purpose
This paper aims to investigate the effects of eliminating Riba in foreign currency transactions. Riba or interest arises when foreign currencies are bought and sold at different rates. From the Islamic perspective, the difference between the buying and selling rates of foreign exchange will constitute Riba. Also, this paper examines the effects of eliminating such Riba on major macroeconomic variables.
Design/methodology/approach
This study is based on the hadith which imply that if buying and selling rates of currencies or foreign exchanges are same, i.e. if one sells BD1 = Dh10 and Dh10 = BD1 on spot, there will be no Riba. This can be guaranteed if the Islamic banking system introduces the technology, often known as FinTech interest-free foreign exchange bank machines (IFfexBM), which will automatically dispense BD10 for Dh100 and vice-versa, both locally and globally, and it will have tremendous positive effects in the economy. Furthermore, the effects of introducing FinTech for eliminating Riba will be analyzed on economic and international trade activities by using aggregate expenditure (AE) and aggregate output model within the tenets of Islamic principles.
Findings
If Islamic banks (IBs) can introduce FinTech global network system where any client can buy or sell foreign currency at the same rate without any markup, it will increase the market share for IBs by increasing the number of customers and number of branches, and it will increase the inflow of funds and volumes of transactions, especially in international trade, global financial transactions and cross-border shopping. Such an increase in transactions will increase AE and AE will continuously shift up. Such an upward shift will have positive effects on equilibrium output, employment and prosperity.
Originality/value
This is, perhaps, one of the latest attempts to eliminate Riba from foreign exchange transactions by introducing FinTech IFfexBM in each and every locality. Such elimination of Riba will not only reduce the cost of cross-border transactions but it will also reduce cost in international trade and financial transactions among nations, and therefore, it will have expansionary effects on equilibrium output, employment and global prosperity.
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Murtadha Aldoukhi and Surendra M. Gupta
This chapter proposes a multiobjective model to design a Closed Loop Supply Chain (CLSC) network. The first objective is to minimize the total cost of the network, while the…
Abstract
This chapter proposes a multiobjective model to design a Closed Loop Supply Chain (CLSC) network. The first objective is to minimize the total cost of the network, while the second objective is to minimize the carbon emission resulting from production, transportation, and disposal processes using carbon cap and carbon tax regularity policies. In the third objective, we maximize the service level of retailers by using maximum covering location as a measure of service level. To model the proposed problem, a physical programming approach is developed. This work contributes to the literature in designing an optimum CLSC network considering the service level objective and product substitution.
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Mohammad Selim and Mohammad Omar Farooq
The purpose of this paper examines how the challenge of poverty can be effectively addressed by broadly adopting Islamic value based cooperative model (IVCM) where the members…
Abstract
Purpose
The purpose of this paper examines how the challenge of poverty can be effectively addressed by broadly adopting Islamic value based cooperative model (IVCM) where the members come together to overcome and eventually eradicate the curse of poverty for themselves and for their future generations.
Design/methodology/approach
The elimination of poverty by adopting IVCM and its impact on the cooperative members, as well as its effects on major macroeconomic variables, are examined on the theoretical ground by using the general equilibrium model of demand and supply-side variables.
Findings
The IVCM for the elimination of poverty reveals that the poverty gap can be eliminated through resource mobilization, as well as by creating new and additional income, wealth and resources through collaborative efforts. Through cooperative organizations based on Islamic values and principles, eventually, the entire poverty pool can enjoy income-earning opportunities through employment or self-employment, as well as promoting skills and education, leading to breaking the vicious cycle of poverty.
Originality/value
Cooperatives in general and Islamic cooperatives, in particular, are not new in the discourse about poverty. Indeed, there are cooperatives throughout the Muslim world and beyond and there are many studies related to cooperatives and their role in development. However, this might be the first theoretical contribution that models the role and impact of cooperatives in a macroeconomic framework, and thus, advances the scientific repertoire of knowledge and understanding about the related discourse by developing a rigorous mathematical model.
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Mohammad Selim and M. Kabir Hassan
This paper aims to examine the effects of interest-free and interest-based monetary policy on inflation and unemployment rates for two groups of countries where in one group…
Abstract
Purpose
This paper aims to examine the effects of interest-free and interest-based monetary policy on inflation and unemployment rates for two groups of countries where in one group, interest-free monetary policy (IFMP) was pursued, while in the other group, interest-based monetary policy (IBMP) was followed.
Design/methodology/approach
This study involves a sample of 23 developed countries divided into two groups. The authors measure economic performance by misery index (MI), and MI is calculated as unemployment rate plus inflation rate. A group of countries, where MI is lower, performs better compared to the other group where MI is relatively higher.
Findings
The results reveal that in group of 12 countries where IFMP is adopted, the MI is lower and thus performs better compared to a group of countries where IBMP is pursued.
Research limitations/implications
The findings of this study have profound implications for the policymakers and government leaders who look for a solution to maintain both low inflation and unemployment rates. The findings in this study clearly portray that such ideal situations can only be achieved by pursuing IFMP. No wonder the countries which have been historically pursuing IFMP such as Japan, Switzerland, Sweden, the Netherlands and Denmark have been able to contain both inflation and unemployment rates compared to their counterparts among the English-speaking countries.
Originality/value
This is one of the most recent tests on the differences in economic performance between IFMP and IBMP. These results have significant value for policymakers and central bankers who have been struggling to maintain lower MI for decades.
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Smart card-based E-payment systems are receiving increasing attention as the number of implementations is witnessed on the rise globally. Understanding of user adoption behavior…
Abstract
Smart card-based E-payment systems are receiving increasing attention as the number of implementations is witnessed on the rise globally. Understanding of user adoption behavior of E-payment systems that employ smart card technology becomes a research area that is of particular value and interest to both IS researchers and professionals. However, research interest focuses mostly on why a smart card-based E-payment system results in a failure or how the system could have grown into a success. This signals the fact that researchers have not had much opportunity to critically review a smart card-based E-payment system that has gained wide support and overcome the hurdle of critical mass adoption. The Octopus in Hong Kong has provided a rare opportunity for investigating smart card-based E-payment system because of its unprecedented success. This research seeks to thoroughly analyze the Octopus from technology adoption behavior perspectives.
Cultural impacts on adoption behavior are one of the key areas that this research posits to investigate. Since the present research is conducted in Hong Kong where a majority of population is Chinese ethnicity and yet is westernized in a number of aspects, assuming that users in Hong Kong are characterized by eastern or western culture is less useful. Explicit cultural characteristics at individual level are tapped into here instead of applying generalization of cultural beliefs to users to more accurately reflect cultural bias. In this vein, the technology acceptance model (TAM) is adapted, extended, and tested for its applicability cross-culturally in Hong Kong on the Octopus. Four cultural dimensions developed by Hofstede are included in this study, namely uncertainty avoidance, masculinity, individualism, and Confucian Dynamism (long-term orientation), to explore their influence on usage behavior through the mediation of perceived usefulness.
TAM is also integrated with the innovation diffusion theory (IDT) to borrow two constructs in relation to innovative characteristics, namely relative advantage and compatibility, in order to enhance the explanatory power of the proposed research model. Besides, the normative accountability of the research model is strengthened by embracing two social influences, namely subjective norm and image. As the last antecedent to perceived usefulness, prior experience serves to bring in the time variation factor to allow level of prior experience to exert both direct and moderating effects on perceived usefulness.
The resulting research model is analyzed by partial least squares (PLS)-based Structural Equation Modeling (SEM) approach. The research findings reveal that all cultural dimensions demonstrate direct effect on perceived usefulness though the influence of uncertainty avoidance is found marginally significant. Other constructs on innovative characteristics and social influences are validated to be significant as hypothesized. Prior experience does indeed significantly moderate the two influences that perceived usefulness receives from relative advantage and compatibility, respectively. The research model has demonstrated convincing explanatory power and so may be employed for further studies in other contexts. In particular, cultural effects play a key role in contributing to the uniqueness of the model, enabling it to be an effective tool to help critically understand increasingly internationalized IS system development and implementation efforts. This research also suggests several practical implications in view of the findings that could better inform managerial decisions for designing, implementing, or promoting smart card-based E-payment system.
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Mohammad Selim and M. Kabir Hassan
This paper aims to examine how a central bank (CB) can act as a lender of last resort (LOLR) for both Islamic and conventional interest-based banks by pursuing a Qard-al-Hasan…
Abstract
Purpose
This paper aims to examine how a central bank (CB) can act as a lender of last resort (LOLR) for both Islamic and conventional interest-based banks by pursuing a Qard-al-Hasan (QH)-based monetary policy (MP).
Design/methodology/approach
The role of the CB as LOLR under QH-based MP and its effects on major macroeconomic variables, including deposits, loan creation and aggregate expenditures, are examined on theoretical grounds by using the aggregate output and aggregate expenditure model under the framework of Islamic MP.
Findings
When the CB acts as LOLR by pursuing QH-based MP, it automatically empowers Islamic banks (IBs) by providing access to borrowing funds from the CB on a QH basis. As a result, IBs will not be required to hold billions of dollars as liquid assets against liquidity risks. Thus, the lending capacity of IBs will increase and deposit expansion, loan creation and aggregate expenditures in the economy will all expand. This will in turn increase real GDP and employment while reducing the unemployment rate.
Originality/value
This is the first paper to analyze CBs acting as LOLR for both IBs and conventional interest-based banks by pursuing a QH-based MP, thus providing equal opportunities and equal access to borrowing facilities from the CB, along with equal partnership and fair competition for all and absolutely no discrimination to anyone. The LOLR service to all banks under QH-based MP will unveil a new horizon of opportunities where all financial institutions are expected to thrive. IBs will escape the constraints of the constant fear of liquidity risks and find a level-playing field.
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Hassan M. Selim, Reda M.S. Abdel Aal and Araby I. Mahdi
This paper introduces a modified single linkage clustering heuristic (MOD‐SC). The proposed MOD‐SLC objective is to test the application of Baroni‐Urban and Buser (BUB) similarity…
Abstract
This paper introduces a modified single linkage clustering heuristic (MOD‐SC). The proposed MOD‐SLC objective is to test the application of Baroni‐Urban and Buser (BUB) similarity coefficient to the manufacturing cell formation (MCF) problem instead of Jaccard’s similarity coefficient. The MOD‐SLC has been compared and evaluated against three cluster formation‐based heuristics for MCF. The three heuristics are: the single linkage clustering, enhanced rank order clustering, and direct clustering algorithm. The MCF methods considered in this comparative and evaluative study belong to the cluster formation approach of solving the MCF problem. The comparison and evaluation are performed using four published performance measures. A total of 25 published and ten hypothetical and randomly generated problem data sets are used in the proposed evaluative study. Results analysis is carried out to test and validate the proposed BUB based MOD‐SLC. Finally the pros and cons of each method are stated and discussed.
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Hassan M. Selim, Riyad Eid and Gomaa Agag
The adoption of smart classroom is increasing in higher education around the world. Yet, factors affecting smart classroom adoption have not been sufficiently explored. Based on…
Abstract
Purpose
The adoption of smart classroom is increasing in higher education around the world. Yet, factors affecting smart classroom adoption have not been sufficiently explored. Based on the innovation diffusion theory and external pressures, the present study developed a model to investigate the main drivers of smart classroom adoption.
Design/methodology/approach
SEM-AMOS was used to analyse the data collected from a sample of 1,208 educators.
Findings
The findings revealed that innovation diffusion theory and external pressures provide an appropriate model for understanding smart classroom adoption.
Practical implications
The findings offer important implications for higher education institutions, IT managers, and are likely to stimulate further research in the area of smart classrooms.
Originality/value
To the best of the authors' knowledge, this is the first study that used innovation diffusion theory external pressures to understanding smart classroom adoption.