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This paper aims to explore whether the market perceives liquid international sovereign sukūk as distinct from comparable bonds and as an asset class of their own that could shield investors against turbulences in the bond markets.

If sukūk and bonds belong to the same asset class, then basically the same supply and demand factors determine inverstors’ activities in both markets. This should lead to matching patterns of yield curves for sukūk and bonds comparable in terms of issuers, maturity, currency, size, liquidity and rating. Only a rough analysis of holding and trading patterns of conventional and Islamic sukūk investors was possible, as most sukūk market transactions are “over-the-counter” and not registered in the Bloomberg database. However, price information could be used for an analysis of yield curves of liquid sovereign sukūk and comparable bonds.

Conventional investors participate in the sukūk market, but their influence on prices is rather small, as they act primarily as intermediaries (i.e. market makers) as opposed to price setters. The yield curves of the selected bonds and sukūk widely match. This suggests that bonds and liquid sovereign sukūk belong to the same asset class. Furthermore, as turbulences in conventional markets are also reflected in the sukūk markets, Islamic investors themselves play a role in the transmission.

The study of holding patterns and of the market perception of sovereign sukūk and bonds required a focus on four countries with deep and (potentially) liquid sukūk markets (Malaysia, Turkey, Indonesia and Hong Kong) and US$-denominated international securities. Some suitable combinations of sukūk and bonds are relatively young issuances with time series data for two to three years only. Data on holding patterns are sketchy and require interpretations based on market knowledge.

Parallel yield curves indicate that conventional investors do not perceive international sovereign sukūk as an asset class of their own distinct from conventional government bonds. This market perception of liquid international sovereign sukūk could have an impact on other types of sukūk (e.g. on international corporate sukūk) if sovereign sukūk are taken as pricing and performance benchmarks.

The paper sheds light on institutional investor behavior in the bond and sukūk markets and outlines data availability issues that constrain quantitative analyses in over-the-counter markets.

1. Reason as the Source of Knowledge For medieval men, the existence of a personal and acting God was beyond any doubt. They were convinced that God intervenes into and interferes with the course of the world. The acting of God was a main factor for the explanation of natural phenomena. But with the passing of time, the understanding of nature improved and more and more phenomena could be explained by appeal to reason only and without recourse to actions of God. It became the general opinion that natural phenomena are subject to invariable natural laws. This clear departure from the God‐related understanding of nature happened when modern philosophy emerged in the 17th and 18th century. This modern philosophy saw nature as a mechanic construction. One of the leading philosophers of that period, Rene Descartes, argued that the laws of mechanics are the laws of nature. Descartes, the founder of rationalistic philosophy, was no atheist, but when he referred to God, it was only to become sure that what is clear (and rational) is also true.

The aim of this paper is to show that there is need for revitalization of the normative branch of political economy. The first part of this paper will deal with some methodological reservations against a participation of economists in a rational discussion of normative issues. The second and third parts will outline the approaches and problems of two unconventional schools of thought in present‐day economics which make attempts to strive for a reconciliation of positive and normative economics.

Development, Markets, Competition and Entrepreneurs. Economic development shall improve the efficiency of resource utilization; this requires profound structural change. A policy impeding change obstructs development. After the collapse of the centrally planned economics it has become a commonplace that markets can enforce efficiency and shall induce development. Economic textbooks explain that markets require private property and prices determined by demand and supply. When some former socialist countries started their transformation towards‘market economies’by liberalizing prices and privatizing large public enterprises, the result was a sharp increase of prices and unemployment. Public monopolies with controlled prices were replaced by private monopolies with unregulated prices, and while the public enterprises (whose losses were covered by the state) were vehicles for the (formal) realization of the full employment guarantee, the privatized enterprises as pofit‐oriented ventures are compelled to reduce costsespecially costs of overstaffing. The lesson to be learned (or recalled) from this experience is that it is not the market as such which improves the general welfare of the people, but the competitive market.

The world economy is a network of individual states and regional groupings of countries which are interlinked by trade in cross‐border goods and services, movements of factors of production (labour and especially capital) and financial flows. The intensity of these international linkages has grown in absolute and relative terms (related to GDP) after World War II and especially in the 1990s. After the collapse of the communist systems and in view of a worldwide political trend towards deregulation and liberalisation, increasing globalisation has become a widely debated phenomenon. One difference between the 1990s and previous periods is the increasing internationalisation of production through networks of transnational corporations (TNCs).

Posits that the disappointing results of external and formal development aid in recent decades have drawn increasing attention to co‐operatives and other community or informal economies which are often attributed a more promising developmental potential due to the shared values of the group members and their identification with collectable goals. Gives the example of the Grameen Bank in Bangladesh which often serves as the prime example of this assumption. Examines how far these factors ‐ which are beyond the scope of traditional economic theory ‐ influence the success of organizations. Concludes that rather mutual social control conditions of a geographically immobile and homogeneous population in a small rural community must be regarded as the basis of the success of community and informal economies.

This paper primarily aims to review and analyze a new model for Islamic finance based on Laurence J. Kotlikoff's idea of limited purpose banking (LPB). In addition, this paper aims to highlight, explain and discuss various aspects of LPB and how it suits the original aspirations of pioneer writers in Islamic finance.

Based on an extensive literature review, this paper aims to highlight, explain and discuss the reform of the Islamic finance industry based on Kotlikoff's model of LPB.

Based on a modified LPB model, Islamic financial institutions could be established to provide specific services with clear aims and objectives. These LPB Islamic financial institutions would operate in a similar way to LPB.

As there is no perfect plan, the proposal of this paper is far from being perfect and is open to discussions and improvements. The paper will, hopefully, spark off quite a discussion on the topic; may result in a better understanding of the model; and provide some alternative solutions to the current structurally ill financial system.

The paper provides some practical ideas for a better implementation of Shari'ah principles in financial intermediation of the Islamic financial system.

Kotlikoff's LPB proposal for reforming the financial system is new and has been directed to the conventional financial system. This paper represents the first attempt to apply his proposal to the Islamic finance industry.

This paper critically reviews and analyzes the trends in waqf studies within the Islamic economics literature. It analyzes the recent developments and debates in waqf reform and advances the argument for prioritizing research on waqf economics; the waqf dimension that is concerned with modelling how to utilize it to enhance productivity, consumption, redistribution, investment and saving, and generally contribute sustainably towards poverty reduction, economic empowerment and development.

The paper is conceptual in nature, focusing on a systematic historical analytical review of waqf studies in Islamic economics literature.

Despite the documented historic role of waqf in constructing the Muslim socio-economic architecture as the third economic sector and a mechanism for civilizational development and renewal, it received little attention in the early writings on modern Islamic economics. While the past one decade has witnessed a renewed interest in waqf research, most studies focus on its legal, juristic and administrative aspects in addition to the nostalgic reflections on its past glories. Little attention is comparatively given to the socio-economic aspect, which represents the actual raison d’être for its institutionalization.

An important task ahead of the current generation of Islamic economists is to formulate waqf-based development models that are rooted in proper diagnosis and deep understanding of the current socio-economic realities of the OIC member countries for the purpose of uplifting living standards and stimulating sustainable socio-economic development.

The paper contributes to the debate on priorities in waqf studies and practice and can trigger further discourses and research on the future of research in waqf economics.

The financial crisis at the end of the past decade resulted in downturns in stock markets and the collapse of many large banks around the world. It encouraged economists worldwide to consider alternative financial solutions. Attention has been focused on Islamic finance as an alternative model. This study examines the performance of Islamic banks in 10 Middle Eastern and North African (MENA) countries over the period of 2005–2010.

It is an intertemporal analysis where it compares the profitability, liquidity, risk and solvency, and efficiency of 43 Islamic banks before and after the financial crisis.

The results show that the financial crisis negatively affected the performance of Islamic banks. The profitability and liquidity of Islamic banks in Gulf Cooperation Council (GCC) countries decreased drastically after the crisis. Islamic banks in non-GCC countries were efficient and more profitable compared to GCC countries. However, they took excessive risk during and after the financial crisis. The chapter concludes that Islamic financial institutions are not immune from the effects of the global recession.

The financial crisis has led to a greater recognition of the importance of liquidity risks. Reinforcing regulations and setting up a strong liquidity management framework are needed to improve the Islamic financial industry.