This paper provides the general idea on Islamic Finance, covering the history and the legislative framework. The paper also covers various aspects of Islamic Finance, and variation of Islamic Banking from conventional banks. The paper concludes that Islamic Finance is panacea for financial crisis and has proved to be one of the safer approaches as it seeks to reduce concentration of wealth in a few hands, which may be detrimental to society.
Political support for Argentina's currency board rested on distributing the early gains from ending hyper-inflation and the spending made possible with access to external credit. When these gains were exhausted and external shocks left the peso overvalued, neither Argentina's political system nor its economy could adjust. The needed adjustment went well beyond simple fiscal tightening: it required deciding who would incur the financial losses associated with the deep contraction needed to correct a real over-valuation in a heavily indebted economy. By 2000, Argentina faced the prospect of further economic contraction, a banking crisis and an external sovereign debt crisis. Even if none of the three crises was avoidable, preemptive action might have made one or more of them less severe. Yet preemption was a political orphan - no political constituency in Argentina argued to bring some pain forward for a chance of less pain down the road, and the IMF and G-7 preferred continued financing to the political risk of supporting a new macroeconomic strategy.
Inspired by Dornbusch's model of exchange rate overshooting we develop a theory of stock market behaviour. The idea is that stock market prices overshoot and undershoot their long-run equilibrium values which are determined by the development in the real economy. The overshooting is fuelled primarily by a loose monetary policy. The simple macro model consists of three markets - the money market, the stock market and the goods market - interacting with different speeds of adjustment. The goods market slowly adjusts relative to the money and the asset market. This model can explain some of the major features of the global financial crisis, having its origin in the loose monetary policy in the USA and spreading its recession-plagued effects all over to the world economy. The model focuses primarily on the monetary interpretation of the present crisis leaving aside the complex interactions of the real estate bubble in the USA, followed by the innovation of new financial instruments which were sold all over the world, hoping to disperse the inherent risks. Nor does this model deal with the institutional aspects of the financial crisis (the failed behaviour of banks, the banking crises, unregulated financial markets, etc.). These are questions of better international regulation of the financial industry touched upon by the G-20 summit in London.
This issue addresses the long financial crisis of 2008 and the nature and diversity of artistic responses to it. This financial crisis is understood as a globalized result of late capitalism that nonetheless is experienced differently at local, regional, and national levels. It is multi- faceted in nature, a phenomenon that has historical roots and precedents that inform contemporary responses. Artists are not restricted to engage with the economy through one specific vehicle of inquiry or one type of medium and message. Therefore, the central question that this issue poses is: what is the artist's role in finance, crisis, and the economy? Should artists: fix the economy; explain it; attempt to alter it; reject it; participate in it; or none of the above? The articles, artists' projects and interviews presented here attend to these questions through a wide-ranging lens including: studies of historical precedents such as the Great Depression of 1929 and currency crises in Latin America in the 1970s; artistic direct interventions within financial systems that reveal and challenge their opaque processes and value systems; alternative currencies highlighting the neo-colonialism of global financial markets; and blockchain-based rethinking of art market ownership models. These multi-faceted projects spanning different time periods and geographies offer crucial and distinct theoretical positions. This issue, which saw its origins in a panel for the 2017 College Art Association Conference in New York City, adds to scholarship on these pressing topics and seeks to foster a continued discourse on the intersections of art and financial crisis.
This paper exams the impact of high levels of bank debt, leverage, credit obtained from government banks and cash reserves in the long and short terms investments of firms in the main Latin American countries after this crisis. For this purpose, it is applied a difference-in-differences test in a sample of more than 500 public and private firms, using hand-collected data of firms' governmental bank dependence. The review period considers five previous (2003–2007) and subsequent years (2008–2012) to the crisis. The major results are reduction of long-term investments for firms with greater banking dependence, as well as short-term investments for firms with a higher level of cash reserves. Besides, firms that are more reliant on government-owned banks reduce capital expenditures. Differently from other studies, this one examines the impact of the last global financial crisis on the firms´ investment, considering its dependence of bank debt of institutions that belongs to the government or not. Understanding the mechanisms available to emerging economies can shed light on new countercyclical policies of governments and changes in the legislations of the financial system.
This paper analyzes the impacts of the 1998 and 2008 financial crises on the Korean labor market. We study the historical background of the Korean Employment Insurance System and the change of labor policies from the 1998 Asian financial crisis to the current 2008 global financial crisis. While it is arguable to say that the expansion of the social welfare system in the Republic of Korea is main source of difference between the two crises, it is certain that the social welfare system is one of the influential factors that helped overcome the problems of the global financial crisis. From an analysis of the Korean experience on the two financial crises, we can deduce the following. First, financial stability at the national level is important to stabilize employment. Second, countries need to develop a social welfare system ahead of any economic crisis. Third, layoffs should be the last resort to lowering labor costs, even at a time of recession. Finally, cooperation and coordination among government departments are crucial to overcome the crisis in labor market.
This study analyzes the trends in the financial sector over the past 30 years, and argues that unsupervised financial innovations and lenient government regulation are at the root of the current financial crisis and recession. Combined with a long period of economic expansion during which default rates were stable and low, deregulation and unsupervised financial innovations generated incentives to make risky financial decisions. Those decisions were taken because it was the only way for financial institutions to maintain market share and profitability. Thus, rather than putting the blame on individuals, this paper places it on an economic setup that requires the growing use of Ponzi processes during enduring economic expansion, and on a regulatory system that is unwilling to recognize (on the contrary, it contributes to) the intrinsic instability of market mechanisms. Subprime lending, greed, and speculation are merely aspects of the larger mechanisms at work. It is argued that we need to change the way we approach the regulation of financial institutions and look at what has been done in other sectors of the economy, where regulation and supervision are proactive and carefully implemented in order to guarantee the safety of society. The criterion for regulation and supervision should be neither Wall Street's nor Main Street's interests but rather the interests of the socioeconomic system. The latter requires financial stability if it's to raise, durably, the standard of living of both Wall Street and Main Street. Systemic stability, not profits or homeownership, should be the paramount criterion for financial regulation, since systemic stability is required to maintain the profitability - and ultimately, the existence - of any capitalist economic entity. The role of the government is to continually counter the Ponzi tendencies of market mechanisms, even if they are (temporarily) improving standards of living, and to encourage economic agents to develop safe and reliable financial practices. - See also, Working Paper No. 573.1, 'Securitization, Deregulation, Economic Stability, and Financial Crisis, Part I: The Evolution of Securitization.'
Introduction: A mere decade ago Japan's financial system, and especially its banking system, was not only the largest but the strongest in the world. Nine of the world's top ten banks in asset size were Japanese; the Big Four Japanese securities companies were the world's largest; and its life and casualty insurance companies were likewise huge. Banks had ample, low cost, deposit funds and the highest credit ratings. The largest were expanding their international operations vigorously, and performed 34 per cent of the world's international lending business, more than banks domiciled in any other country. Today presents a completely different picture. Japan's financial system is weak and in disarray. Banks no longer rank among the world's top ten, and their credit ratings have declined dramatically. Two of Japan's top 21 banks have already collapsed, as has one of the Big Four securities companies, and a mid-sized life insurance company. This is not only unprecedented in Japan's postwar history, until the 1990s it was unthinkable. This paper focuses primarily upon the problems of the Japanese banking industry, although the analysis applies in many respects to the securities and insurance industries as well. It does not consider Japan's fiscal mess: its budget deficits, tax system, government fiscal and loan programs, or the special account debts that cannot be serviced. This is a Pacific Economic Papers comprehensive overview rather than a detailed analysis of specific issues or topics. It provides the groundwork for the conference Financial Reform in Japan and Australia by addressing two themes: the 'postwar' financial system and its implications; and causes of the current banking difficulties. The objectives of any financial system in a market-based economy are threefold: the safety of the system in order to prevent bank runs and monetary panics; its effectiveness in mobilizing savings and allocating them to productive, efficient uses by financial intermediation through banks or capital (stock and bond) markets; and efficiency in the provision of financial services, best achieved in a highly competitive system. These objectives can be in conflict, depending on how the system is organized and what constitute the rules of the game. The achievement of these objectives depends on the overall economic environment, including the level of economic development, the degree of competition, and the extent of global financial market integration. In designing the postwar financial system, the regulatory authorities, essentially the Ministry of Finance, always placed great emphasis on system safety, and maintained or built upon the wartime bank-based financial system.
The paper deals with the problems of tax coordination and perspectives during and after financial crisis. As we see the 2008 financial crisis is the worst economic crisis. Great Depression of 1929 was financial crisis which know all world financers and we can compare these days financial crisis with 1929 financial crisis. Thr 2008 financial crisis has been characterised by a rapid credit expansion, high risk-taking and exacerbated financial leverage and credit crunch when the bubble burst. In particular, it reviews the existing evidence on the links between taxes and many characteristics of the crisis. Finally, it examines some possible future tax options to prevent such crises.This financial and economic crisis presents major challenges for tax administration. With the economic downturn, tax agencies are encountering growing compliance risks and greater demands for taxpayer support in the face of prospective budget cuts. This paper examines these challenges and sets out a strategy and measures for responding to them. Theoretical and empirical studies suggest that an economic downturn tends to worsen taxpayer compliance in important aspects. While a drop in compliance may have some countercyclical effects on the economy, tolerating noncompliance is not an appropriate response to the crisis because it is distortionary, inequitable, and, perhaps most importantly, hampers the rebuilding of tax bases over the medium-term.The crisis therefore presents the financial authorities – central banks, regulators and finance ministries – with two challenges:The first and most urgent is to design short-term policies so as to at least limit the adverse impact of deleveraging and deflation on the real economy. We cannot make that impact nil, but we do know how to avoid the policy mistakes which turned the initial problems of 1929-30 into the Great Depression. Fiscal and monetary policies need to be carefully designed, and – as we approach a zero interest rate and consider quantitative easing options – need to be increasingly coordinated. And ...
This article takes a look at the nature and main features of the world financial crisis, the reasons for it, and why it became aggravated. It analyzes the influence of the world crisis on the financial, real, and social sectors of Azerbaijan's economy. It puts forward possible development scenarios of the situation in Azerbaijan in the context of the world financial crisis. It examines the anti-crisis measures adopted by the government and the Central Bank of Azerbaijan, discusses ways to overcome the crisis, and offers several solutions aimed at reducing the risks of the crisis for Azerbaijan's economy. The author believes that world oil prices, the duration of the financial crisis, and any extreme fluctuations in the national currency—the manat—will have the most profound effect on the scope of Azerbaijan's economic problems. The government's anti-crisis program should be implemented as soon as possible in order to minimize the influence of the world crisis on Azerbaijan's economy and a transfer be made to the next stage in economic transformation, with the emphasis on institutional and structural reforms, in order to maintain the economy's accelerated development.
This article explores the link between the financial crisis and Euroscepticism at the level of public opinion, building on and developing further the literature on the impact of economic, identity and institutional factors on Euroscepticism. It argues that the economic crisis did not substantially bring economic factors back in as an important source of Euroscepticism, even though the most pronounced increase in Euroscepticism has taken place in the countries most affected by the crisis. By contrast, national identity and political institutions play an increasingly important role in explaining public Euroscepticism.
The current financial crisis poses little risk of a meltdown like the Great Crash in 1929. Left to itself, it certainly could. But the governments are wide awake and a flood of interventions to kill the crisis is in evidence. The crisis therefore will pass. Will it however destroy "capitalism" and undermine "globalization"? I find such claims fanciful.
This paper strives to understand the role of the deregulation movement in the 2008 financial crisis, which almost destroyed the US economy. Financial regulations created a legal barrier that safeguarded the US economy for four decades after the Great Depression. With the intent of improving the competitiveness of the US financial industry in the global economy, the US government adopted many deregulatory measures from the 1980s to the 2000s. For a short while, financial deregulation stimulated impressive economic growth. However, this temporary prosperity was subsequently overshadowed by the greatest financial disaster in modern history. This paper shows how the financial regulatory edifice was initially established after the Great Depression and how it was gradually eroded by the deregulation movement, which ultimately contributed to the 2008 financial crisis. Also, the remedies and new regulations that were introduced during and after the crisis are discussed.
As the U.S. economy has mainly recovered from the 2008 Financial Crisis, with unemployment below 5%, inflation below 2%, and the stock market near all-time highs, there is growing concern about the huge amount of U.S. government debt, which today stands at over $20 Trillion dollars and 106% of Debt/GDP. Could this be the next thing to derail the U.S. economy, and in so doing, negatively affecting nearly every other country in the world? This paper reviews the size and scope of the U.S. National Debt in it's historical context. There are three reasons to be alarmed about this, especially now. First, the annual budget deficit, which had been shrinking in the later years of the Obama administration, is once again on the rise. Second, the Republican tax reduction bill is estimated to add another trillion dollars to the overall level of government debt in the next 10 years, even with higher GDP growth rates factored in. Third, the Trump administration, while slashing other areas of government spending (State Department, Environmental Protection Agency, and more) is once again seeking major increases in military spending. This scenario is strikingly similar to the early 1980's, where deficits soared as a result. The paper also offers some solutions as to what can be done to bring it down to a more manageable level (or at least reduce it's rate of growth). Like many things in economics, the "best" solution is to find ways to return to levels of historical GDP growth rates (3% and above).
As the U.S. economy has mainly recovered from the 2008 Financial Crisis, with unemployment below 5%, inflation below 2%, and the stock market near all-time highs, there is growing concern about the huge amount of U.S. government debt, which today stands at over $20 Trillion dollars and 106% of Debt/GDP. Could this be the next thing to derail the U.S. economy, and in so doing, negatively affecting nearly every other country in the world? This paper reviews the size and scope of the U.S. National Debt in it's historical context. There are three reasons to be alarmed about this, especially now. First, the annual budget deficit, which had been shrinking in the later years of the Obama administration, is once again on the rise. Second, the Republican tax reduction bill is estimated to add another trillion dollars to the overall level of government debt in the next 10 years, even with higher GDP growth rates factored in. Third, the Trump administration, while slashing other areas of government spending (State Department, Environmental Protection Agency, and more) is once again seeking major increases in military spending. This scenario is strikingly similar to the early 1980's, where deficits soared as a result. The paper also offers some solutions as to what can be done to bring it down to a more manageable level (or at least reduce it's rate of growth). Like many things in economics, the "best" solution is to find ways to return to levels of historical GDP growth rates (3% and above).
