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Muhammad Omer
State Bank of Pakistan, Pakistan
Economics, Econometrics & Finance

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MONETARY POLICY PASS-THROUGH, EXCESS LIQUIDITY AND PRICE SPILLOVER: A COMPARATIVE STUDY OF CONVENTIONAL AND ISLAMIC BANKS OF PAKISTAN Muhammad Omer
Journal of Islamic Monetary Economics and Finance Vol 5 No 2 (2019)
Publisher : Bank Indonesia

Show Abstract | Download Original | Original Source | Check in Google Scholar | Full PDF (740.094 KB) | DOI: 10.21098/jimf.v5i2.1064

Abstract

This study investigates the comparative pass-through of policy rate to the retail prices, spillover of prices between Islamic and conventional banking systems, and the impact of excess liquidity on these pass-throughs using data from interbank market of Pakistan. The results suggest that the monetary policy shock affect retail prices of Islamic banks similar to conventional banks, confirming the results of earlier studies. Moreover, there is a strong spillover between the prices of two systems; Islamic banks are following (leading) the conventional banks in pricing the lending (deposit) products. Islamic bank has acquired advantage in the deposit pricing by taping the religious depositors, which also may have promoted financial inclusion thereby contributing to the economic growth and improved income distribution in the society. Our findings suggest that the presence of excess liquidity have no effect on pass- through of policy rate in the Islamic system, which is contrary to the prevalent notion. However, excess liquidity significantly affects the spillovers of prices between the systems. These results support the hypothesis that the Islamic banks are investing in interest-based government securities indirectly via conventional banks. Our findings may help in enhancing the regulatory efficiency of the central banks and the conduct of the monetary policy in the countries where dual banking system exists.
DO WORKERS’ REMITTANCES PROMOTE ECONOMIC GROWTH? A CASE STUDY OF PAKISTAN Sarmad Ellahi; Muhammad Omer
Journal of Islamic Monetary Economics and Finance Vol 6 No 4 (2020)
Publisher : Bank Indonesia

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.21098/jimf.v6i4.1187

Abstract

This study investigates the role of workers’ remittances in promoting economic growth in Pakistan, using data from 1976-2017. Remittances are an important source of Sharia-compliant (mostly) FX inflows, which may contribute to the economic development of many Islamic and non-Islamic economies. Nonetheless, they are more relevant to Islamic economies, as they could potentially reduce the requirements of interest-based FX financing from donor agencies and/or from global capital markets. The impact of workers’ remittances on the economic growth of Islamic developing economies remains a little explored area. Our research, which employs a case study of Pakistan, is first in this direction. We used the GMM estimation procedure to obtain efficient estimates in the presence of endogeneity and simultaneity bias. Our estimates show that an increase in remittance inflows positively affects the economic growth of Pakistan. The increase in per capita GDP could be primarily due to an increase in the consumption of low-income recipients. It is likely that this consumption demand promotes investment activity; however, the study could not establish the impact of remittances on such activity.
Co-Authors Sarmad Ellahi