In response to these developments, the world economy is predicted to contract further, but at lower rates. The performance of the balance of payments has strengthened as a result of a larger than expected surplus in the current account.
INTRODUCTION
HISTORICAL MONOLOGUE
Among the several factors that contribute to bubble formation are high credit growth coupled with low interest rates. The historical cases of asset price debacles are therefore useful to have some empirical analysis dedicated to the assessment of current housing market conditions from the point of view of emerging economies, their policy choices related to the housing market.
THE CONCERNS BEHIND THE ≈ASSET PRICE BUBBLE DEBACLE∆
Financial crisis in the developing world √ Post USA ≈Asset price bubble debacle∆ √ A new way forward. Financial crisis in the developing world √ Post USA ≈Asset price bubble debacle∆ √ A new way forward.
SEEKING TO REDRESS THE ≈BUBBLE TROUBLE∆
A key feature of the UK rescue plan was the provision of (voluntary) capital injections in the form of preference shares or unsecured debt. Furthermore] the government can assume part of the bond and take advantage of the lower interest rate at which it can access funds and its greater ability to demand repayment.
THE GREAT DEBATE ON MONETARY POLICY
Until sub-prime, major institutions in their research papers suggested that Central Banks should not target asset prices as most of the crisis occurred in emerging economies. More simply, it means that the central bank adopts a tough stance against rising asset prices early on.
THE WAY FORWARD √ THE REGULATORY APPROACH
Kent and Lowe believe that prudential regulation could support monetary policy by reducing the adverse impact of asset price bubbles on the financial system, which in turn ensures that the banking system is healthy and not overly exposed to the risks associated with bubble bursting. 38 Asset Price Bubbles and Monetary Policy», Kent, C. Lowe, 1997, Reserve Bank of Australia, Research Discussion Paper 9709. each class is determined by the regulator.
CONCLUDING THOUGHTS
Carrying stocks according to the traditional approach emphasizes the boom and bust cycle and therefore can contribute to both the creation of price bubbles and their bursting. Finally, we found that the role of financial regulation in controlling the emergence and damage from asset price bubbles remains relatively limited.
LESSONS LEARNED FROM REPEATED FINANCIAL CRISES
AN ISLAMIC ECONOMIC PERSPECTIVE
INTRODUCTION 1. Background
- Objectives
- Data and Methodology
A new dataset on financial crises from 1970–2007 can be found in Laeven and Valencia (2008), covering 395 episodes of financial crises (banking crisis, currency crisis and sovereign debt crisis), including 42 twin crises and 10 triple crises. . In the qualitative part of the study, an analytical descriptive method based on data and literature will be used.
LITERATURE REVIEW
- The Origin of Financial Crisis
- The Theory of Financial Crisis
- Previous Studies under Conventional Economic Perspective
- Previous Studies under Islamic Economic Perspective
The next sub-section will discuss the theory of financial crisis under conventional and Islamic economic perspectives. Types of financial crisis in the conventional economic literature include currency crisis or balance of payments/BOP crisis, banking crisis, sovereign debt crisis, and stock/asset market crash. A financial crisis that erupted in the financial sector can be isolated to the financial sector and not affect other sectors of the economy, such as the 1987 stock market crash in the US.
The global financial crisis in the years 1929-1930 is called the Great Depression as it caused economic depression in many countries in different parts of the world. The literature discussing the Asian financial crisis is numerous, such as Kaminsky and Reinhart (1999), Lindgren et al. There are also some literatures that discuss the financial crisis in Indonesia, such as Kenward (2002) and Batunanggar (2002).
In addition, literatures discussing the current global financial crisis caused by the US subprime mortgage crisis have also been written by many authors, such as Caprio et al.
ROOT CAUSES OF FINANCIAL CRISES
Because it is a zero-sum game (you lose, I win), there is no value added in the economy, unlike trading or investment activities based on risk sharing. This bubble economy is like a time bomb that will explode in the form of a crisis at some point in the future. The current international monetary system is based on multiple fiat money of every country in the world with variable value and without any real asset backups.
Therefore, each country gains a seigniorage profit by printing the national currency at the expense of all people as money holders in the form of depletion of purchasing power (or inflation). Since financial markets offer a fixed and pre-determined rate of return, money/capital initially invested in the real sector quickly flows into the financial sector (which cannot generate real added value), so that the amount of capital concentrated in the financial sector has exceeded tens more than in the real sector (which can create real added value). The belief that the financial sector is an independent sector in the economy may be wrong, as the dichotomy has created a large gap between the real and financial sectors.
Consequently, all elements and instruments in the financial sector must be maintained and protected to fully support real sector activities.
EMPIRICAL EVIDENCE
- Type and Source of Data
- Variable and Operational Definition
- Method of Estimation
- Results and Analysis 1. Stationary Test
Therefore, Sakti (2007) argues that the economy is inevitably dichotomized (consciously or unconsciously) into two main activities, namely real activity and monetary activity (also known as the classical dichotomy).4 As a result of this misallocation of resources, a lack of growth capital in real sector, while it caused an artificial growth of the financial sector with flooded capital in the form of bubbles that would eventually correct and burst in the form of a financial crisis. Only the money supply or the money needed in the economy in an Islamic perspective (JMJMJMJMJM) is the equilibrium intrinsic M0, which approximates the monthly consumption data obtained from SEKI-BI. The disadvantage of this model is that not all variables (the root causes of financial crises) are included in the model.
Model specification includes the selection of variables and their lag length to be used in the model. The trick is to re-incorporate the original equation in level into the new equation as follows. III.6) (III.7) Where a is the long-term regression coefficient, b is the short-term regression coefficient, λ is an error correction parameter, and the phrase in the parenthesis shows the cointegration between the variables y and z. The IRF can be used to determine the response of an endogenous variable from the shock of other variables in the model.
Furthermore, estimation results show that lnFM has a statistically significant effect in the long term, while lnJM has no statistically significant effect on the crisis.
CONCLUSIONS AND RECOMMENDATIONS 1. Conclusions
- Recommendations
With the political will and commitment by the government, financial crises can be gradually and systematically eradicated and controlled. The further replacement of a multiple currency system LnEXC with a single global currency LnGOLD will reduce a further 18.4% share of financial crises in Indonesia. The root causes of financial crises from Islamic economic literature can be human errors and natural phenomenon uncontrollable by man.
Empirical results show that if the three main causes of financial crises (fiat money, interest and exchange rate) were replaced by their Islamic alternatives (money supply only, PLS and common global currency), three riba-rooted causes of financial crises can be eliminated . The maysir-rooted causes of financial crises can also be eliminated with bans or restrictions on speculative transactions, contracts and products. In a country that adopts a dual monetary system, like Indonesia, the root causes of financial crises can be partially eradicated and partially controlled.
In Financial Crises: Lessons from the Past, Preparation for the Future, redaktuar nga Gerard Caprio, James A.
MODELING OF INDONESIA CONSUMER PRICE INDEX USING MULTI INPUT INTERVENTION MODEL
W. Novianti 1 Suhartono 2
- THEORY
- Step Function Single Input Intervention Model
- Pulse Function Single Input Intervention Model
- Multi Input Intervention Model
- Parameters Estimation
- RESEARCH METHODOLOGY
- EMPIRICAL RESULT
- Pre Intervention Modeling
- Intervention Modeling of Indonesia CPI
- CONCLUSION
Equation (IV.1) shows that the magnitude and duration of the intervention effect are given by b, s and r. The one-input step function intervention model with b=2, s=1 and r=1 can be obtained by substituting equation (IV.3) into (IV.1). The interpretation of the effect of a single input intervention with an impulse function can be done in the same way as the step function intervention in Equations (IV.4) to (IV.7).
Based on the figure (IV.6), the forecast data pattern of the ARIMA model (green line) is different from the pre-intervention data pattern (red line). Details of the effects of the monetary crisis are presented in Table IV.2. a) Time series plot (b) Bar graph residual of the pre-intervention model. Based on the result in Table IV.1, the next intervention is the fuel price increase in October 2000.
Using the same steps, the interference model with all the interference events in Table (IV.1) produces the multi-input interference model as follows. a) Time series plot (b) Bar graph of the residuals of the intervention model due to changing the base year to 2002.
DETERMINANT OF SUKUK RATINGS
- Rating Agencies approach
- Previous Studies
- Hypotheses and Theoretical Framework Hypothesis One about Total Asset (H1)
- DATA AND SAMPLE SELECTION
- METHODOLOGY
- EMPIRICAL RESULT AND INTERPRETATIONS
- Screening for Normality, Collinearity, Homoscedasticity, Outliers and Extreme Values
- Assessing the Multinomial Logistic Regression Result (significance tests) 1. Interpretation of Result (Parameter Estimates)
- CONCLUSION
Some of the results also suggest that the logistic model still produced promising results in predicting bankruptcy. This study uses a sample (a synthesized sample of the actual estimate) to build the model, predict the original cases, and test the significance of the variables. This category is then used as a reference category for the rest of the other categories.
To test the overall fit of the model, we will use the model fit information measured by -2Log Likelihood, while the Likelihood-Ratio test method will be used for testing the significance of individual independent variables, based on the recommendation van Touray (2004) with reference to Norusis (1999). Reference will be made to two related R-Squares measures that are said to be proxy of the OLS R-Square methods (Cox and Snell R2 and Nagelkerke R2) to test the strength of the association. Thus, we can say that our model explained on average more than half of the observed variations in the dependent variables based on Pseudo-R2.
Summarizing the results of the M-Logit model in this section, we can say that out of a set of six independent variables (total assets, long-term leverage, interest coverage, roa, beta and guarantee status), only three variables (total assets, beta and guarantee status) were found to have a significant explanatory relationship with sukuk ratings.
WRITING GUIDANCE
Schooling and Economic Growth: A King-Rebelo Experiment with Human Capital∆, Journal of Monetary Economics, October pg.
