Is An Interest-Free Small Open Economy Possible In A Global Economy?

Yıl 2023, Cilt: 8 Sayı: 1, 325 - 334, 30.06.2023

Erdal Harunogullari

Öz

This article examines the feasibility and effects of a small, interest-free open economy. It analyzes the impact of profit-loss-sharing (PLS) scenarios on exchange rates and capital mobility using the uncovered interest parity (UIP) condition. Descriptive analysis and stochastic simulation model were used in the article. The study argues that a small open economy can thrive globally with a compatible PLS system and flexible exchange rates. Findings suggest that an Islamic open economy under flexible exchange rates achieves higher output growth, lower inflation, and improved welfare compared to a traditional open economy. The article provides empirical evidence and policy recommendations, addressing a research gap in understanding the relationship of a small open Islamic economy with the outside world.

Anahtar Kelimeler

Islamic Economics and Finance, Profit- Los Sharing, Small Open Islamic Economic Model, Islamic Economic Model

Küresel Ekonomide Faizsiz Bir Küçük Açık Ekonomi Mümkün müdür?

Öz

Bu makale, küçük, faizsiz bir açık ekonominin fizibilitesini ve etkilerini incelemektedir. Karşılanmamış faiz paritesi (UIP) koşulunu kullanarak kâr-zarar paylaşımı (PLS) senaryolarının döviz kurları ve sermaye hareketliliği üzerindeki etkisini analiz eder. Makalede betimsel analiz ve stokastik simülasyon modeli kullanılmıştır. Çalışma, küçük bir açık ekonominin, uyumlu bir PLS sistemi ve esnek döviz kurları ile küresel olarak gelişebileceğini savunuyor. Bulgular, esnek döviz kurları altındaki İslami bir açık ekonominin, geleneksel bir açık ekonomiye kıyasla daha yüksek çıktı büyümesi, daha düşük enflasyon ve gelişmiş refah elde ettiğini göstermektedir. Makale, küçük bir açık İslam ekonomisinin dış dünya ile ilişkisini anlamadaki bir araştırma boşluğunu ele alarak ampirik kanıtlar ve politika önerileri sunmaktadır.

Anahtar Kelimeler

İslam Ekonomisi ve Finansı, Kâr-Zarar Ortaklığı, Küçük Açık İslami Ekonomik Model, İslami Ekonomisi Modeli

Kaynakça

• Alexius, A. (2001). Uncovered Interest Parity Revisited. Review of International Economics, 9(3), 505–517.
• Anggraeni, A., & Berniz, Y. M. (2022). The effect of asset quality, profit and loss sharing on Sharia Banking Liquidity in Indonesia. Technium Social Sciences Journal, 27, 423–436.
• Ayub, M. (2014). Understanding Islamic finance. John Wiley & Sons.
• Chapra, M.U. (1988). Towards a Just Monetary System. The Islamic Foundation.
• Clarida, R., Gali, J., & Gertler, M. (2001). Optimal Monetary Policy in Closed versus Open Economies: An Integrated Approach. Natıonal Bureau Of Economıc Research. w8604.
• Czech, K. (2017). Testing Uncovered Interest Parity in the PLN/Jpy Foreign Exchange Market: A Markov-Switching Approach. Metody Ilościowe W Badaniach Ekonomicznych, 18(1), 18–26.
• De Paoli, B. (2009). Monetary Policy and Welfare in a Small Open Economy. Journal of International Economics, 77(1), 11–22.
• El-Gamal, M.A. (2009). Islamic finance: Law, Economics and Practice. Cambridge University Press.
• Engel, C. (1996). The Forward Discount Anomaly and the Risk Premium: A Survey of Recent Evidence. Journal of Empirical Finance, 3(2), 123-192.
• Fahamsyah, M. H., & ’Ainulyaqin, M. H. (2023). A Bibliometric Analysis of Profit Loss Sharing (PLS) in Islamic Banking Research Using Vosviewer Application. Perisai: Islamic Banking and Finance Journal, 7(1), 126–142.
• Frankel, J.A. (1982). In Search of the Exchange Risk Premium: A Six-Currency Test Assuming Mean-Variance Optimization. Journal of International Money and Finance 1(1), 255-274.
• Frenkel, J.A. (1976). A Monetary Approach to the Exchange Rate: Doctrinal Aspects and Empirical Evidence. The Scandinavian Journal of Economics, 78(2), 200-224.
• Gali, J., & Monacelli, T. (2004). Monetary Policy and Exchange Rate Volatility in a Small Open Economy. SSRN Electronic Journal.
• Ghayad, R., & Hamdan, M. (2021). Islamic banks: Profit Sharing Contracts and Agency Theory in the Islamic banks in Lebanon. International Journal of Research and Studies Publishing, 2(18), 137–162.
• Gourinchas P.O., & Rey H. (2014). External adjustment global imbalances valuation effects. In Gopinath G., Helpman E., & Rogoff K., Handbook of international economics (Vol. 4 pp.585-645). Elsevier.
• Habib, M. M., & Stracca, L. (2012). Getting beyond carry trade: What makes a safe haven currency? Journal of International Economics, 87(1), 50–64.
• Hansen, L. P. & Hodrick, R. J. (1980). Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An econometric analysis. Journal of Political Economy 88(5), 829-853.
• Hasan, Z. (2011). Scarcity, Self-Interest and Maximization From Islamic Angle. MPRA. Paper No. 29414.
• Hidayah, N., & Karimah, N. A. (2023). Are Sharia Financing Schemes Profitable? The Case of Islamic Rural Banks in Indonesia. EL DINAR: Jurnal Keuangan Dan Perbankan Syariah, 11(1), 58–76.
• Iqbal, Z., & Mirakhor, A. (1999). Progress and Challenges of Islamic Banking. Thunderbird International Business Review, 41(4–5), 381–405.
• Iqbal, Z. & Mirakhor, A. (2007). An Introduction to Islamic Finance: Theory and Practice. John Wiley & Sons.
• Ismartono, I. (2023). Non-Usury Business Model in Islamic Banking Practice (Waqf, Profit and Loss Sharing, Zakat). Jurnal Manajemen, 14(1), 72.
• Karim, Z. A., & Karim, B. A. (2014). Interest Rates Targeting of Monetary Policy: An Open Economy SVAR Study of Malaysia. Gadjah Mada International Journal of Business, 16(1), 1.
• Khan, M.S. (1986). Islamic Interest-Free Banking: A Theoretical Analysis. IMF Staff Papers 33(1), 1-27.
• Khan, M.S. (1995). Islamic Interest-Free Banking: A Theoretical Analysis. In: Khan, M.S. and Mirakhor, A. (eds.), Theoretical Studies in Islamic Banking and Finance. The Institute for Research and Islamic Studies, pp. 15-44.
• Klyuev, V., Medina, L., Plotnikov, D., Gudmundsson, T., Nandwa, B., Schiffrer, F., & Yang, D. (2022). Emerging Markets: Prospects and Challenges. IMF Working Papers, 2022(035), 1.
• Li, L., & Lin, G. P. (2017). The Research of Uncovered Interest Parity and Monetary Policy. Proceedings of the 2017 3rd International Conference on Social Science and Higher Education.
• Maurer, B. (2010, April 16). Form versus substance: AAOIFI projects and Islamic fundamentals in the case of sukuk. Journal of Islamic Accounting and Business Research, 1(1), 32–41.
• Nugraheni, P., & Alimin, I. N. (2020, December 2). Factors influencing PLS financing: the perspective of Indonesian Islamic banks employees. PSU Research Review, 6(2), 77–89.
• Obaidullah M., & Khan T. (2008). Islamic microfinance development: Challenges and initiatives. Islamic Research & Training Institute.
• Obstfeld, M. & Rogoff, K. (1996). Foundations of International Macroeconomics. MIT Press.
• Sarno, L., Tsiakas, I., & Ulloa, B. (2016). What Drives International Portfolio Flows? Journal of International Money and Finance. 31(6), 1615-1635.
• Sarno, L., & Valente, G. (2009). Exchange Rates and Fundamentals: Footloose or Evolving Relationship? Journal of the European Economic Association, 7(4), 786–830.
• Sarea, A. M., Musleh Al-Sartawi, A. M. A., & Khalid, A. A. (2018). Electronic Financial Disclosure: Islamic Banking vs Conventional Banking in GCC. Lecture Notes in Computer Science, 279–291.
• Siddiqi, M.N. (2006). Islamic Banking and Finance in Theory and Practice: A Survey of State of the art. Islamic Economic Studies, 13(2), 1-48.
• Sutrisno, S., & Widarjono, A. (2022). Is Profit–Loss-Sharing Financing Matter for Islamic Bank’s Profitability? The Indonesian Case. Risks, 10(11), 207.
• Syarifuddin, S. (2020, February 21). Financing Schemes and Lost Profit Sharing in Islamic Banking: Challenges and Opportunities. ATESTASI: Jurnal Ilmiah Akuntansi, 3(1), 1–13.
• Widarjono, A., Anto, M. H., & Fakhrunnas, F. (2020). Financing Risk in Indonesian Islamic Rural Banks: Do Financing Products Matter? The Journal of Asian Finance, Economics and Business, 7(9), 305–314.
• Yu, E. P. Y., & Elgadi, E. M. (2018). The profitability of Islamic banking in Sudan. International Journal of Management Practice, 11(3), 233.
• Zaher, T. S., & Kabir Hassan, M. (2001). A Comparative Literature Survey of Islamic Finance and Banking. Financial Markets, Institutions and Instruments, 10(4), 155–199.