Abstract
In his comment on my paper (Staff Papers, Vol. 33, March 1986, pp. 1–27) Doak contends that I used the “wrong” model to characterize the Islamic banking system, and that I should have employed criteria other than dynamic stability to contrast the Islamic and traditional banking systems.
In his comment on my paper (Staff Papers, Vol. 33, March 1986, pp. 1–27) Doak contends that I used the “wrong” model to characterize the Islamic banking system, and that I should have employed criteria other than dynamic stability to contrast the Islamic and traditional banking systems.
The objective of my paper was clearly stated: to examine the dynamic response of an Islamic bank to a sudden decline in income (fall in asset values). The model specified, which is simply a dynamic version of the standard IS-LM framework, seems perfectly sensible for the purpose at hand. The assumption of only outside money is perhaps unrealistic, but relaxing this assumption to allow banks to issue deposits does not change the analysis in any way. There is only one bank in the system (with no distinction made between the central bank and commercial banks), and it issues a liability. I called that liability money but could easily have called it deposits.
I agree with Doak that my model does not explain the effects of moving to a 100 percent reserve requirement for banks. But the model was not designed to do so. There are a whole host of important issues in Islamic banking and finance other than stability, and, as shown in a recent collection of papers on the subject,1 one needs different models to analyze them. Doak’s criticism of my model—that it is not sufficiently general to be able to handle all the relevant issues, including “questions of a political nature”—is certainly correct. But how many models in economics would be immune to such criticism?
A NEW IMF PUBLICATION Staff Studies for the World Economic Outlook, July 1988
This volume consists of background analyses for the Fund’s April 1988 World Economic Outlook:
I. How Accurate Is the World Economic Outlook? A Post Mortem on Short-Term Forecasting at the International Monetary Fund
M. J. Artis
II. MULTIMOD—A Multi-Region Econometric Model
Paul R. Masson, Steven Symansky, Richard Haas, and Michael Dooley
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The World Bank Economic Review
Volume 2
September 1988
Number 3
Agricultural Incentives in Developing Countries: Measuring the Effect of Sectoral and Economywide Policies
Anne O. Krueger, Maurice Schiff, and Alberto Valdes
Inflationary Rigidities and Orthodox Stabilization Policies: Lessons from Latin America
Miguel A. Kiguel and Nissan Liviatan
Nutrients; Impacts and Determinants
Jere R. Behrman, Anil B. Deolalikar, and Barbara L. Wolfe
A Structural Model of Manufactured Exports of Developing Countries
Cristian Moran
Export Quota Allocations, Export Earnings, and Market Diversification
Taeho Bark and Jaime de Melo
Approximating the Effective Protection Coefficient without Reference to Technological Data
Patrick J. Conway and Malcolm Bale
Subscriptions to The World Bank Economic Review for the first two volumes are available without charge upon written request to World Bank Publications, Sales Unit, Washington, D.C. 20433, U.S.A.
Journal of Money, credit, and banking
RECENT DEVELOPMENTS IN MACROECONOMICS
Papers and comments from the conference sponsored by the Federal Reserve Bank of Cleveland, held in October 1987. Mailed to subscribers as a supplement to the August 1988 issue.
CONTENTS
Recent Developments in Macroeconomics: A Very Quick Refresher Course
N. Gregory Mankiw
Comments by: Herbert Stein and Edmund Phelps
Postwar Developments in Business Cycle Theory: A Moderately Classical Perspective
Bennett J. McCallum
Comments by: Lawrence Summers and Peter K. Clark
What Microeconomics Teaches Us about the Dynamic Macro Effects of Fiscal Policy
Laurence J. Kotlikoff
Comments by: William Niskanen and Preston Miller
Some Recent Developments in Labor Economics and Their Implications for Macroeconomics
Lawrence F. Katz
Comments by: Robert Topel and Thomas Kniesner
On the Roles of International Financial Markets and Their Relevance for Economic Policy
Alan C. Stockman
Comments by: Patrick Kehoe and J. David Germany
Financial Structure and Aggregate Economic Activity: An Overview Mark Gertler
Comments by: Marvin Goodfriend and Laurence Weiss
The regular August 1988 issue contains articles by the following authors: Steven R. Beckman, Joshua N. Foreman. Waller Wasserfallen, W. Douglas McMillin, C. Richard Long, Mark L. Gardner. Ali F. Darrat, Paul R. Allen, William J. Wilhelm, and Michael Devercux.
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In statistical matter throughout this issue,
dots (…) indicate that data are not available;
a dash (—) indicates that the figure is zero or less than half the final digit shown, or that the item does not exist;
a single dot (.) indicates decimals;
a comma (,) separates thousands and millions:
“billion” means a thousand million, and “trillion” means a thousand billion;
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components of tables may not add to totals shown because of rounding.
* Mr. Khan is Assistant Director in the Research Department. He is a graduate of Columbia University and the London School of Economics and Political Science.
Khan, Mohsin S., and Abbas Mirakhor, eds., Theoretical Studies in Islamic Banking and Finance (Houston: Institute for Research and Islamic Studies, 1987).
