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PurposeThis paper is focused on determining the asymmetric effects of exchange rate on money demand function in Nigeria.Design/methodology/approachIt employs the empirical model of Baumol–Tobin. Baumol (1952), which was founded on the opportunity and transaction cost of holding money. Monetary aggregates, M1, M2 and M3, are used for the real money balances based on the nonlinear Autoregressive Distributed Lag bound testing procedure.FindingsThe results indicate that the positive and negative partial sum of exchange rate changes differ in magnitude and size, supporting the hypothesis of asymmetric effects of exchange rate changes on the demand for money in Nigeria.Originality/valueThis is the first paper to consider the new broad money aggregate (M3).

PurposeThe purpose of this study is to investigate the effect of financial intermediation functions of banks on economic growth in sub-Saharan Africa.Design/methodology/approachThe study employs data from 11 sub-Saharan African countries over the period 1970–2016. Using broad money supply, bank credit to the private sector and bank deposits as financial intermediation measures, the authors apply the random effects (RE) technique based on the recommendation of the Breusch–Pagan test.FindingsThe results show that except for bank deposits, broad money supply and bank credit to the private sector significantly influence economic growth. While broad money has a negative relationship with growth, bank credit to the private sector and bank deposits are positively correlated with economic growth.Originality/valueThe relationship between financial intermediation and economic growth remains unsettled, as results vary across countries. Besides, in developing countries' perspective, extant studies are largely focused on individual countries to investigate the financial intermediation-growth nexus. In this study, the authors take a different direction by employing a panel approach and thus adding to the few cross-country studies on the subject matter. Also, unlike other studies that have focused on a single indicator of financial intermediation, this study uses three indicators of financial intermediation which broadly reflect the intermediation functions of banks.

Purpose This study aims to examine the impact of zakat on the economic growth for a sample of Muslim countries. As a matter of fact, Zakat is a religious tax on wealth paid annually to specified recipients. As it leads to income redistribution and increases the aggregate demand, zakat can be a growth factor in the Islamic framework. Design/methodology/approach This paper is based on a dynamic panel data model for the purpose of investigating the role of zakat in the economic growth for a sample of eight Muslim countries during the period ranging from 2004 to 2017. The general method of moments is applied. Findings The findings provide evidence that zakat stimulates the country’s growth. Indeed, as zakat funds are directed to increase consumption, investment or government expenditure, they spur on the economic growth. Moreover, the authors come to the conclusion that more trade openness allows an increase in the real gross domestic product (GDP) per capita. However, the broad money to GDP and population growth rate seem insignificantly associated with the economic growth for the sample considered. Practical implications The findings have substantial implications for the economic policy in Muslim countries. Authorities may further rely on zakat to boost the economic growth. First, it is essential to improve the muzakki’s knowledge on zakat to increase their intention, and so their ability and willingness to pay zakat. Second, the government intervention in both zakat collect and distribution becomes mandatory. Therefore, the contribution of zakat to the economic growth will be higher. This requires better-quality services of zakat institutions. Originality/value A few studies have empirically looked into the impact of zakat on the economic growth, especially for panel data. Hence, the present study tries to enrich the literature on this topic. It creates significant evidence regarding the relevance of zakat in Muslim countries. The findings provide empirical support that zakat is an additional growth factor in the Islamic framework.

Purpose This paper aims to examine the key factors determining bank deposit growth in Turkey for the period 2000Q1–2016Q4. Design/methodology/approach The study employs the autoregressive distributed lag approach to investigate the effect of bank-level and macroeconomic factors on deposit growth. Findings The results reveal that bank stability, banking sector efficiency, broad money supply, economic growth, and inflation are significant determinants of deposit growth in the long run. The findings further show that in the short run, only branch expansion and broad money supply are relevant for bank deposit mobilization. Originality/value This paper departs from the extant empirical studies that focus on the determinants of individual savings behaviour in Turkey. Considering the short- and long-run time dimensions, the authors distinctively examine how bank characteristics influence deposit growth, thus presenting a relatively pioneering attempt in this context.

Purpose The purpose of this paper is to investigate the effects of unanticipated monetary policy innovations on output and price for Ethiopia from 1991:Q1 to 2016:Q1. Design/methodology/approach Short run and long run identification schemes on structural vector autoregressive model are employed in this study. Findings The impulse response function results generated show that while a positive shock in interest rate causes a reduction in output and price puzzle, a positive shock to broad money supply has a positive and significant effect on output and price. A positive shock in real effective exchange rate has also an expansionary, though insignificant, effect on impact on both output and price. These results are especially true for the short run identification scheme. As to the results from the variance decomposition, the study shows that the highest variation in output and price is caused by broad money supply shock in the short run. Originality/value It adds to the scarce empirical literature on the effects of monetary policy innovations on the Ethiopian economy.

Purpose Over one and half years have passed since the demonetization of Indian economy had occurred on November 8, 2016. The drastic step was initiated by the Prime Minister Narendra Modi with an intention to curb the “huge” circulation of illicit or “black” money of Indian economy by means of withdrawal of high value denominations of Rupees 500 and Rupees 1,000 from the supply of broad money (M3). This step helped to demonetize around 86 per cent value of total money supply leading to an unprecedented chaos in the economy and public life. The long delays in issuing fresh currency notes at the banks and ATMs further deteriorated the sudden economic crisis. Design/methodology/approach This research paper is aimed at exploring the proclaimed “efficacy” of demonetization policy as proposed by Reserve Bank of India by means of a mathematical approach and critically examines the effects of demonetization on the illicit money supply of Indian economy on the basis of macroeconomic theory. Findings From the mathematical model and related estimates, it may be easily deduced that the Indian policymakers deliberately hurled the masses in one of the gravest economic crises with a clear-cut intention of creating a political gimmick, when in reality, the proportion of illegitimate money supply was not even 1 per cent of total legitimate supply of money. Originality/value The analyses and findings related to this paper are based on mathematical modeling and logical interpretations. This paper is free of plagiarism as all the necessary sources and references are properly cited.

Purpose The purpose of this paper is to empirically examine the impact of financial integration on macroeconomic volatility for developing and emerging economies of Asia. Design/methodology/approach The effects of financial integration and dynamics of macroeconomic volatility over time and across different groups of Asian economies vis-à-vis advanced economies are investigated using four different variables such as consumption, output, income and the ratio of consumption to income. Further, an empirical link between the degree of international financial integration and macroeconomic volatility for Asian economies is econometrically investigated using generalized method of moments (GMM) system one-step estimator. Findings Macroeconomic volatilities of per capita output and consumption growth tend to be lower for advanced economies compared to Asian economies. The computed cross-sectional median of the volatility of consumption, output, income and the ratio of consumption volatility to income suggested that the volatility of advanced economies is lower compared to all the regions of Asia. GMM results suggested that the financial openness, trade openness and broad money are negatively and significantly associated with macroeconomic volatility whereas inflation is positively and significantly associated with macroeconomic volatility but the magnitude of trade openness is found to be negligible. Research limitations/implications The present study has not included the effects of other country-specific variables (such as fiscal policy volatility) and other external factors to understand macroeconomic volatility. Practical implications High integration of economies promote economic growth, reduce macroeconomic volatility and reduce vulnerability to external shocks. This implies that policy makers should thrive to reform and create institutional infrastructure to deepen the integration. Originality/value The paper is an important empirical contribution toward examining the effects of financial integration on dynamics of macroeconomic volatility for a large number of Asian developing and emerging economics over time and across different groups using recent data and latest analytical framework and techniques.

Purpose Information and communication technology (ICT) appears to play an indispensable task in influencing and directing the growth process of several developing countries. The spread of ICT in the South Pacific region including Fiji has facilitated faster and smother business in different sectors of the economy such as banking, education, transport and tourism. The purpose of this paper is to contribute to empirical literature and explore the effect of ICT on economic output, both in the short run and long run in the Fiji Islands. Design/methodology/approach The economic analysis was conducted using data from 1990 to 2016, improved framework of Solow (1956) and the autoregressive distributed-lag bounds approach to cointegration. Findings from the study and economic standpoint, the ICT is indeed important. The analysis shows an indication of long-run cointegration relationship among the variables for the two indicators of ICT. From the analysis, it is also observed that the two ICT indicators have a statistically significant and positive effect on output with coefficient ranging from 0.04 to 0.06. Research limitations/implications These results extend the ICT literature by providing support for it in case of a small developing island economy. The study highlights that while the two proxies of ICT are important for long term output growth, besides broad money and capital stock, the principal technology contributor is a mobile cellular subscription in Fiji Islands. Practical implications The policymakers need to work diligently to not only enhance ICT related infrastructure but also focus on better services and communication in different sectors of the economy. The efficient use of present technologies such as 3-G and 4-G is crucial and must be connected and made available to other smaller islands of Fiji. Originality/value The recent study has focused on the contribution of ICT on small island developing country, relative to large developing or developed countries. Furthermore, the author examined the contribution of two indicators of ICT using Solow (1956) augmented framework.

Purpose The purpose of this paper is to examine whether a long-run stable money multiplier exists in Kazakhstan. It also investigates whether different episodes of currency shocks, including the financial crisis and recession of 2008–2010, have affected the working of the money multiplier in Kazakhstan. Design/methodology/approach The long-run multiplier is tested employing three cointegration tests: Engle–Granger (1987), Phillips–Ouliaris (1990) and Johansen and Juselius (1990). Findings The results of cointegration and coefficient restrictions tests are consistent with the money multiplier when broad money (M2 and M3) is used rather than when narrow money (M1) is used. The relationship between broad money and monetary base is structurally stable when examined on the basis of a dynamic (an error-correction) model. However, the M2 multiplier performs better than the M3 multiplier. Research limitations/implications This paper is restricted to testing a mechanistic version of the money multiplier and its stability using both narrow (M1) and broad money (M2 and M3) supplies. Thus, the paper focusses on the money view of the multiplier rather than the credit view of the multiplier. Practical implications One implication that emerges from the findings of this paper is that the National Bank of Kazakhstan can control M2 by controlling the monetary base, and hence the latter can serve as an indicator for monetary policy. Social implications The validity of the money multiplier implies that monetary policy can be conducted to control the money supply and the provision of bank credit to private sector to stabilize economic activity, thereby leading towards social stability in the economy as well. Originality/value In addition to offering a coherent survey of the literature on the standard money multiplier, this paper is a first attempt to find a stable money multiplier for Kazakhstan.

Purpose– The purpose of this paper is to examine the relationship between financial development indicators and human development in India using annual data from 1980-2012.Design/methodology/approach– The Ng-Perron unit root test is used to check for the order of integration of the variables. The long run relationship and short run dynamics are examined by implementing the ARDL bounds testing approach to co-integration. Granger’s non-causality test and variance decomposition techniques are also used to examine the impact of financial development indicators on human development.Findings– The results confirm a long run relationship among the variables. The results of granger non causality indicate that unidirectional causality runs from financial development indicators to human development index (HDI). The variance decomposition analysis shows that among all the financial indicators, broad money supply (M3) has the largest contribution to changes in human development in India.Research limitations/implications– The present study recommends for appropriate reforms in financial market to attain sustainable human development in India. The findings will be useful for India’s policy makers, in order to maintain the parallel expansion of financial development and human development.Originality/value– This paper is first of its kind to empirically examine the casual relationship between financial development indicators and human capital development proxied by HDI in India by using modern econometric techniques.

Purpose – The purpose of this paper is to examine the inter‐temporal causal relationship between financial sector development and poverty reduction in Zambia. The paper attempts to answer one critical question: does financial sector development in Zambia lead to poverty reduction?Design/methodology/approach – The paper uses the newly developed autoregressive distributed lag‐bounds testing procedure, which has numerous advantages, especially when the sample size is small. In addition, the paper uses three proxies of financial development, namely broad money supply (M2/GDP), domestic credit to the private sector as a ratio of gross domestic product (DCP/GDP) and domestic money bank assets (DMBA), against private per capita consumption, a proxy for poverty reduction.Findings – When the broad money supply ratio (M2/GDP) is used as a proxy for financial sector development, poverty reduction seems to cause the development of the financial sector. However, when the DCP and the DMBA are used, financial developmen...

PurposeIn line with the government's policy to promote Malaysia as an international hub for Islamic banking and finance, the purpose of this paper is to evaluate the dynamic effects of both Islamic and conventional stock markets on foreign portfolio investments.Design/methodology/approachFirst, the paper explores the short and long‐run relationships between (FPI) and three markets, i.e. the goods, money, and securities market. Second, the paper attempts to examine the relative importance of the three markets in accounting for variations in FPI. Consistent with earlier studies, the goods market variable considered is real income (Y). The money market variables tested are the broad money supply (M2), treasury bill rate (TBR) and the US Federal Fund rate (FFR), while the security market is represented by both Kuala Lumpur Shari'ah Index (KLSI) and Kuala Lumpur Composite Index (KLCI).FindingsThe findings of the study indicate that among the three markets studied, the securities market in Malaysia (both conventional and Islamic) is the most significant market in attracting FPI into the economy. This implies that to a certain extent, the government's effort in promoting Malaysia as the international hub for the Islamic capital market has been successful.Originality/valueThe paper suggests that further efforts need to be enhanced in promoting Malaysia as the International hub for the Islamic banking and finance. The paper's findings shed some light on the policy ramifications pertaining to attracting foreign investors into the ICM in Malaysia and in moving towards a more globally competitive capital market.

This paper examines the existence and stability of both the long‐ and short‐run demand for narrow and broad money balances. The data for Singapore are used as a case study. The quarterly period examined is 1973:2‐1999:3 (105 observations). The study reveals the existence of a systematic long‐run relationship among real money balances, real income, interest rate and exchange rate. Results from testing the hypothesis of a unitary price elasticity confirm that only the broad money aggregate could be used as intermediate target of monetary policy. Using a formal test of parameter constancy designed specifically for cointegrating vectors, it is shown that nonstationarity and time invariance in the demand for money can be resolved by the inclusion of the exchange rate.

Applies a modified Keynesian money demand function to household money demand in Poland from 1969 to 1993. Co‐integration between the demand for broad money, income and shortage, despite the regime shifts during the 1980s and full liberalization of the Polish economy in the beginning of 1990. Compared to other studies, pays much attention to empirical evidence concerning portfolio arguments in the money demand function. Because the Polish economy has developed from a cash into a savings economy, over the sample period, observes an increase in price and interest rate elasticities of the demand for different financial assets.

The article is concerned with company demand for broad money in the post‐Competition and Credit Control period. Equations are estimated for (a) all industrial and commercial companies and (b) a sample of large manufacturing and non‐manufacturing companies. The main findings are (1) that economies of scale in money holdings are only evident for large companies, (2) that only the large manufacturing companies respond significantly to changes in long‐term interest rates and (3) that adjustment of money holdings to changes in income and interest rates is completed within six months.