The Islamic interest-free banking system: some empirical evidence

1988 ◽  
Vol 20 (3) ◽  
pp. 417-425 ◽  
Author(s):  
Ali F. Darrat
Keyword(s):  
Empirical Evidence ◽  
Banking System ◽  
Free Banking

scholarly journals Unanswered quibbles: George Selgin still gets it wrong with fractional reserve free banking

2021 ◽  
Author(s):  
Philipp Bagus ◽  
David Howden
Keyword(s):  
Banking System ◽  
Real Income ◽  
Jel Classification ◽  
Free Banking ◽  
Fractional Reserve Banking ◽  
Credit Expansion ◽  
Investment Projects ◽  
Fractional Reserve ◽  
Monetary Equilibrium ◽  
El Sistema

In this article we reply to George Selgin’s counterarguments to our article «Fractional Reserve Free Banking: Some Quibbles». Selgin regards holding cash as saving while we focus on the real savings necessary to maintain investment projects. Real savings are unconsumed real income. Variations in real savings are not necessarily equal to variations in cash holdings. We show that a coordinated credit expansion in a fractional reserve free banking (FRFB) system is possible and that precautionary reserves consequently do not pose a necessary limit. We discuss various instances in which a FRFB system may expand credit without a prior increase in real savings. These facets all demonstrate why a fractional reserve banking system —even a free banking one— is inherently unstable, and incentivized to impose a stabilizing central bank. We find that at the root of our disagreements with Selgin lies a different approach to monetary theory. Selgin subscribes to the aggregative equation of exchange, which impedes him from seeing the microeconomic problems that the stabilization of «MV» by a FRFB system causes. Key words: Free banking, fractional reserve, monetary equilibrium, credit expansion, economic cycle. JEL Classification: B53, E32, E42, E5, G18, H11, K39, P3, P34. Resumen: En este artículo respondemos a George Selgin, que a su vez respondió a nuestro artículo «Fractional Reserve Free Banking: Some Quibbles». Selgin considera que los saldos de tesorería son ahorros, mientras nosotros nos fijamos en los ahorros reales necesarios para mantener proyectos de inversion. Ahorros reales son ingresos reales no consumidos. Variaciones en los ahorros reales no necesariamente coinciden con las variaciones en los saldos de tesoreria. Mostramos que una expansión crediticia coordinada es posible en un sistema bancario de reserva fraccionaria (FRFB) y que las reservas prudenciales no constituyen necesariamente un limite a la expansión co - ordinada. Discutimos varios escenarios en los que el sistema FRFB puede expandir los créditos sin un aumento previo en los ahorros reales. Todas estas facetas muestran que un sistema bancario de reservas fraccionarias —incluso uno de banca libre— es inherentemente inestable y produce incentivos para imponer un banco central estabilizador. Mostramos que el origen de nuestras diferencias con Selgin está en un enfoque diferente a la teoría monetaria. Selgin es partidario de la ecuación de intercambio que es muy agregada y que le impide ver los problemas microeconomicas que la estabilización de «MV» por parte del sistema FRFB produce. Palabras clave: Banca libre, reserva fraccionaria, equilibrio monetario, expansión crediticia, ciclo económico. Clasificación JEL: B53, E32, E42, E5, G18, H11, K39, P3, P34.

scholarly journals Credit Risk and Macroeconomic Interactions: Empirical Evidence from the Brazilian Banking System

2011 ◽  
Vol 02 (05) ◽  
pp. 910-929 ◽  
Author(s):  
Gustavo José de Guimarães e Souza ◽  
Carmem Aparecida Feijó
Keyword(s):  
Credit Risk ◽  
Empirical Evidence ◽  
Banking System

THE EVOLUTION OF A FREE BANKING SYSTEM

1987 ◽  
Vol 25 (3) ◽  
pp. 439-457 ◽  
Author(s):  
GEORGE A. SELGIN ◽  
LAWRENCE H. WHITE
Keyword(s):  
Banking System ◽  
Free Banking

scholarly journals Money, Banking, and Financial Markets

2019 ◽  
Vol 87 (5) ◽  
pp. 2049-2086 ◽  
Author(s):  
David Andolfatto ◽  
Aleksander Berentsen ◽  
Fernando M Martin
Keyword(s):  
Central Bank ◽  
Financial Markets ◽  
Dynamic Model ◽  
Banking System ◽  
Free Banking ◽  
Lender Of Last Resort ◽  
Fractional Reserve ◽  
Deposit Contracts ◽  
Liquidity Insurance ◽  
Meaningful Role

Abstract The fact that money, banking, and financial markets interact in important ways seems self-evident. The theoretical nature of this interaction, however, has not been fully explored. To this end, we integrate the Diamond (1997, Journal of Political Economy105, 928–956) model of banking and financial markets with the Lagos and Wright (2005, Journal of Political Economy113, 463–484) dynamic model of monetary exchange—a union that bears a framework in which fractional reserve banks emerge in equilibrium, where bank assets are funded with liabilities made demandable in government money, where the terms of bank deposit contracts are affected by the liquidity insurance available in financial markets, where banks are subject to runs, and where a central bank has a meaningful role to play, both in terms of inflation policy and as a lender of last resort. Among other things, the model provides a rationale for nominal deposit contracts combined with a central bank lender-of-last-resort facility to promote efficient liquidity insurance and a panic-free banking system.

scholarly journals FINANCIAL CRISIS, IMF, AND BANK EFFICIENCY: EMPIRICAL EVIDENCE FROM THE ASEAN-4 BANKING SECTORS

2010 ◽  
Vol 12 (2) ◽  
pp. 123-150
Author(s):  
Fadzlan Sufian ◽  
Muzafar Shah Habibullah
Keyword(s):  
Financial Crisis ◽  
Empirical Evidence ◽  
Concentration Ratio ◽  
Banking System ◽  
Asian Financial Crisis ◽  
Data Envelopment ◽  
Bank Efficiency ◽  
Banking Market ◽  
The Impact ◽  
First Time

Despite its severity and deep influence on both the real and financial sectors, empirical evidence on the evolution of the performance of the ASEAN-4 banking sectors since the 1997-1998 Asian financial crisis is relatively scarce. By employing the Data Envelopment Analysis (DEA) approach the present study examines for the first time the impact of the Asian financial crisis on the efficiency of the ASEAN-4 countries banking sectors. This study focuses on two major approaches vis. intermediation and revenue approaches. The empirical findings suggest that the estimates of technical efficiency are consistently higher under the revenue approach. We find that banks are relatively inefficient in a more concentrated banking market. However, when we control for countries that participate in IMF program, the concentration ratio exhibits a positive relationship with bank efficiency levels, implying that the more concentrated banking system which participates in IMF program is relatively more efficient in their intermediation function during the post crisis period. Keywords: Efficiency, DEA, ASEAN, Regression.JEL Classification: G21; G28

scholarly journals FINANCIAL CRISIS, IMF, AND BANK EFFICIENCY: EMPIRICAL EVIDENCE FROM THE ASEAN-4 BANKING SECTORS

2010 ◽  
Vol 12 (2) ◽  
pp. 133-159
Author(s):  
Fadzlan Sufian ◽  
Muzafar Shah Habibullah
Keyword(s):  
Financial Crisis ◽  
Empirical Evidence ◽  
Concentration Ratio ◽  
Banking System ◽  
Asian Financial Crisis ◽  
Data Envelopment ◽  
Bank Efficiency ◽  
Banking Market ◽  
The Impact ◽  
First Time

Despite its severity and deep influence on both the real and financial sectors, empirical evidence on the evolution of the performance of the ASEAN-4 banking sectors since the 1997-1998 Asian financial crisis is relatively scarce. By employing the Data Envelopment Analysis (DEA) approach the present study examines for the first time the impact of the Asian financial crisis on the efficiency of the ASEAN-4 countries banking sectors. This study focuses on two major approaches vis. intermediation and revenue approaches. The empirical findings suggest that the estimates of technical efficiency are consistently higher under the revenue approach. We find that banks are relatively inefficient in a more concentrated banking market. However, when we control for countries that participate in IMF program, the concentration ratio exhibits a positive relationship with bank efficiency levels, implying that the more concentrated banking system which participates in IMF program is relatively more efficient in their intermediation function during the post crisis period.Keywords: Bank, Efficiency, DEA, ASEAN.JEL Classification: G21; G28

scholarly journals Interest Free Banking in Ethiopia: Customer Awareness, Satisfaction and Its Role on Economic Development

2021 ◽  
Vol 5 (1) ◽  
pp. 48
Author(s):  
Debebe Alemu Kebede
Keyword(s):  
Economic Development ◽  
Banking System ◽  
Secondary Data ◽  
Employment Opportunity ◽  
Annual Reports ◽  
Primary Data ◽  
Free Banking ◽  
Banking Services ◽  
Banking Service ◽  
The Government

This study is aimed at evaluating the customer’s awareness and satisfaction toward Interest-free Banking and its role on Ethiopia economic development with some selected Commercial Bank in Ethiopia. To achieve the aim of the study the primary data was collected from Customers and Managers of the selected banks by using convenience method through questionnaire and interview. While, secondary data was collected by compiling and summarizing the bank’s Annual reports and Journals. The collected data was analyzed in descriptive and inferential analysis. The finding of the study depicts as low customer awareness regarding Interest-free Banking services except the Interest-free Banking account holders. Further, majority of Interest-free Banking account holders are more or less satisfied with the current Interest-free Banking services provided since, it can  potentially  serve as  an  alternative  banking  channel  in  filling  the  gap  left  unaddressed  by  conventional  banking  and economic  development in relation to idle  monetary  resource  mobilization  and  allocation,  inviting  to  use  banking system, creating employment opportunity, supporting GDP growth and assisting in stabilizing crisis and arresting inflation. Based on the study result it concluded as Interest Free Banking have its own role on the country economic development through mobilizing the idle monitory resource, allocating the monitory resource, creating employment opportunity, and inviting to the banking system. Therefore, it recommended as the banks should make aggressive promotion on Interest Free Banking services for customers awareness specially those of out of Muslim customers, the government has to support and should give more emphasis to enable Interest Free Banking service, promote Interest Free Banking which can help assist the economy in stabilizing economic crisis and arresting inflation.

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