Search

We show that the impact of global financial crisis (GFC) on Pakistan's economy mainly transmitted through Gulf Financial Crisis (GCC). In this regard, we assess the effects of both the global and Gulf financial crises on remittances, workers' emigration, return migration, national savings and foreign investment. Applying Exploratory Data Analysis (EDA) before (2000–07) and after GFC (2008–18), we demonstrate that Pakistan witnessed remarkably low FDI inflows and labour force emigration along with higher return migration rates after the crises. Investment from the UAE and other Gulf countries declined eightfold immediate after the global financial crisis, contributing considerably to the decline of the country's GDP growth during 2008–10. There was significant curtailment in emigration volumes and spurts in return migration after 2012, because of the Gulf oil price crisis. The positive trend in remittances until 2015 seems to be influenced by post‐9/11 anti‐money laundering legislation and depreciation of the rupee. [ABSTRACT FROM AUTHOR]

We show that the impact of global financial crisis (GFC) on Pakistan's economy mainly transmitted through Gulf Financial Crisis (GCC). In this regard, we assess the effects of both the global and Gulf financial crises on remittances, workers' emigration, return migration, national savings and foreign investment. Applying Exploratory Data Analysis (EDA) before (2000–07) and after GFC (2008–18), we demonstrate that Pakistan witnessed remarkably low FDI inflows and labour force emigration along with higher return migration rates after the crises. Investment from the UAE and other Gulf countries declined eightfold immediate after the global financial crisis, contributing considerably to the decline of the country's GDP growth during 2008–10. There was significant curtailment in emigration volumes and spurts in return migration after 2012, because of the Gulf oil price crisis. The positive trend in remittances until 2015 seems to be influenced by post‐9/11 anti‐money laundering legislation and depreciation of the rupee. [ABSTRACT FROM AUTHOR]

Financial institutions in transition economies maintain higher liquidity at the cost of economic growth. This study offers an alternative policy tool to achieve higher liquidity without compromising economic growth. We show that Zakat—an obligatory Islamic charity with a fixed rate of 2.5%—can be an alternative to the interest rate and that its use as a policy tool promotes economic growth. Instead of considering zakat as a fiscal tool—an alternative to tax—we present it as a monetary policy tool to substitute the interest rate. We provide a framework based on the endogenous growth model, which allows the use of Zakat as a tool to overcome liquidity constraints in transition economies. We also construct an index‐based varying zakat rate adjusted for economic fundamentals, such as economic growth, for each economy. We provide empirical evidence using system generalized method of moments (GMM) in a simultaneous equation model on a panel data of 38 countries for the period 1996–2015. The results show that zakat rate has a significantly positive impact on economic growth. Furthermore, as a policy tool, Zakat has a statistically significant positive impact on FDI and domestic investment, while reducing corruption (CR). The results are robust for various regions and income classifications in different transition economies. The overall findings corroborate that zakat can help achieve the dual objectives of enhanced liquidity and higher levels of economic growth. [ABSTRACT FROM AUTHOR]