scholarly journals Islamic Monetary Policy and Rastin Swap Bonds

2019 ◽  
Vol 3 (2) ◽  
pp. 1-16
Author(s):  
Bijan Bidabad
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Commercial Banks ◽  
Foreign Currency ◽  
Central Banking ◽  
Open Market ◽  
Financial Policies ◽  
Treasury Bills ◽  
The Right ◽  
Banking Operations

Purpose: This paper aims to examine monetary instruments in Islamic central banking framework. As a conclusion, to revive Islamic monetary policy, we should provide some public equity-based instrument as a necessary replacement for conventional bonds and treasury bills to activate non-usury open market operations. Design: We define a type of new negotiable bond as: “Rastin Swap Bonds (RSBs)”, which is based on swapping money between two persons for two different periods. Findings: RSB is a financial paper that observes the right for the lender to borrow an equal amount to his lending from the borrower. Four types of RSBs in domestic money and foreign currency are defined, and their Sharia allowances and monetary, fiscal, and financial effects are evaluated. Research limitations: This bond is a novel design, and it is required to be more elaborated for further practical development and adjustment. Practical implications: Islamic central banking is not different from conventional central banking as a whole, but the role of an Islamic central bank in conducting monetary policy is restricted to use interest-free monetary instruments in an environment that commercial banks are obliged to implement non-usury banking operations. Social implications: Islamic financial instruments should be usury-free and efficient in applying monetary, fiscal, and financial policies at different levels of the central bank, government and commercial banks and non-banking money and financial institutions. Rastin Swap Bond will serve as an important instrument for resource mobilization and will be a primary vehicle for the development of the Islamic capital market and central banking operations. Originality/value: Conventional interest-bearing bonds are not allowed in Islamic central banking. This restriction mostly distinguishes Islamic central banking from the conventional one in implementing monetary policy. Article Type: Technical paper JEL: G21, G28, H81

scholarly journals The Role of Monetary Policy in Activating the Bank Credit Channel: Iraq Case Study

2021 ◽  
Vol 11 (4) ◽  
pp. 4990-5009
Author(s):  
Mustafa Mohammed Sabri
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Central Bank ◽  
Commercial Banks ◽  
Foreign Currency ◽  
Active Role ◽  
Bank Credit ◽  
Credit Channel

The main objective of the research is to find out how monetary policy has influenced the support and promotion of bank credit to promote the economy by creating jobs and addressing unemployment, where the central bank after2003 played a leading and active role in supporting commercial banks and promoting bank credit ‘One of the central bank's important objectives is to stabilize the overall level of prices set out in law No 56 For the year ( ( 2004 Article (3) The Central Bank of Iraq has used the policy of stability in the exchange rate of the dinar as a key tool in stabilizing prices in Iraq through the window of selling foreign currency.

scholarly journals Impact of Monetary Policy on Bank’s Profitability: A Study on Listed Commercial Banks in Bangladesh

2020 ◽  
Vol 5 (2) ◽  
pp. 72-79
Author(s):  
Md. Ariful Hoque ◽  
Afzal Ahmad ◽  
Mustafa Manir Chowdhury ◽  
Mohammad Shahidullah
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Commercial Banks ◽  
Banking System ◽  
Open Market ◽  
Return On Equity ◽  
Time Deposits ◽  
The Government ◽  
The Impact ◽  
Reserve Ratio

Monetary policy is the policy by which the government of a country control supplies of money in an economy which is announced by the central bank for every six months. Central Bank carries out monetary policy by the banking system of a country.  Central Bank uses Bank rate; Cash reserve ratio and open market operation to control the availability of funds in an economy. Within these three instruments, the cash reserve ratio is directly linked to the commercial bank's profitability. Every commercial bank maintains a cash reserve ratio against their demand & time deposits. Being changes in the cash reserve ratio banks profit level may increase or decrease. The prime intention here is to show the impact of monetary policy, especially Cash Reserve Ratio on the commercial bank's profitability. This study covers only listed commercial banks in Bangladesh. As sample researcher purposively selected 15 listed commercial banks that have available information. Results revealed that CRR negatively related to Return On Assets (-0.1133), Return On Equity (-0.0577) as well as Return On Investment (-0.0504). This means the bank's profitability declined due to the increase in cash reserve ratio (CRR). Again regression analysis outlined that the cash reserve ratio negatively impacts on the profitability of studied commercial banks in Bangladesh, which is statistically significant at the 10% level. Researchers proposed that Bangladeshi commercial banks will design their profitability plan by considering monetary policy tools, particularly the Cash reserve ratio.

scholarly journals CENTRAL BANK DIGITAL CURRENCY: ECONOMIC AND LEGAL CHARACTERISTICS

2019 ◽  
pp. 94-100
Author(s):  
T.S. Hudima ◽  
V.A. Ustymenko
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Stability ◽  
Banking System ◽  
Legal Framework ◽  
Central Banks ◽  
Digital Currency ◽  
Business Entities ◽  
The Right ◽  
Article 5

The article is devoted to identifying the peculiarities of the central bank digital currency (CBDC), explaining their impact on the monetary policy of the state, and identifying the prospects for the transformation of domestic banking legislation in connection with the implementation of the CBDC. It is noted that the scope of competence of the Central Bank and the legal basis for the issuance of the CBDC will depend on the economic and legal features of the digital currency, the degree of its impact on the monetary policy, the financial stability of the country’s economy and so on. In the process of forming the appropriate legal field and defining the conceptual apparatus in the sphere of emission and circulation of the CBDC, the peculiarities of the use of the latter in economic transactions and the specific functions not inherent in ordinary means of payment should be taken. СBDC initiatives will help: 1) progressively narrow the banking system at the level of the Central Banks (such as the Chicago Plan) by allowing individuals and businesses to deposit directly into the accounts of the Central Banks; 2) increasing confidence of economic entities and individuals in the financial system; 3) strengthening the financial stability of the economy (both domestically and globally). Granting business entities or individuals the right to store digital money directly with the Central Bank can give rise to two main directions of influence on monetary policy: first, to strengthen its transmission mechanism; secondly, lead to banks being disrupted. This may lead to some legal issues regarding (1) the NBU’s area of competence; (2) the constitutional foundations of the legal economic order (Article 5 of the ECU). In particular, it cannot be ruled out that centralization of the production, servicing, and management of the СBDC turnover may violate the principles of competition in business activities, prevent abuse of monopoly position in the market, etc. Keywords: monetary policy, central bank digital currency, financial stability, competence, legal framework, economic operations, issue.

The Over-Burdened Central Bank and the Shift Away from Autonomy

2017 ◽  
Author(s):  
Pierre L. Siklos
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Stability ◽  
Central Banks ◽  
Central Banking ◽  
Forward Guidance ◽  
Self Assessments ◽  
Crisis Conditions ◽  
Central Bankers ◽  
Influence Behavior

Many central banks took on additional responsibilities. Inadequate self-assessments remain unfinished almost a decade after the crisis erupted. Government-central bank relationships need to be conditioned on whether times are normal versus crisis conditions. Transparency confronts ambiguity when central banks must communicate the outlook and the conditionality of their decisions. Forward guidance was taken too far and ended up being futile. Central bankers simply exhausted their ability to influence behavior through mere words or ambiguous statements. This is a self-inflicted wound for institutions that are seen as overburdened. These forces leave central banking more vulnerable than is commonly acknowledged. Squaring the conventional objectives of monetary policy with the unclear aims of financial stability is difficult. Adequate limitations on the authority of central banks have yet to be thoroughly debated. We are nowhere near resolving the inherent tensions between old and new sets of central bank objectives.

scholarly journals Over- and Underbidding in Central Bank Open Market Operations Conducted as Fixed Rate Tender

2005 ◽  
Vol 6 (1) ◽  
pp. 95-130 ◽  
Author(s):  
Ulrich Bindseil
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Banking System ◽  
Central Banks ◽  
General Question ◽  
Open Market ◽  
Short Term ◽  
Fixed Rate ◽  
Proposed Model

Abstract Open market operations play a key role in allocating central bank funds to the banking system and thereby in steering short-term interest rates in line with the stance of monetary policy. Many central banks apply so-called ‘fixed rate tender’ auctions in their open market operations. This paper presents, on the basis of a survey of central bank experience, a model of bidding in such tenders. In their conduct of fixed rate tenders, many central banks faced specifically an ‘under-’ and an ‘overbidding’ problem. These phenomena are revisited in the light of the proposed model, and the more general question of the optimal tender procedure and allotment policy of central banks is addressed.

Central Bank Communications

2019 ◽  
pp. 262-286
Author(s):  
J. Scott Davis ◽  
Mark A. Wynne
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Open Market ◽  
Monetary Policy Shocks ◽  
Federal Open Market Committee ◽  
Quarter Century ◽  
The Past ◽  
Policy Shocks ◽  
Monetary Policy Shock ◽  
Daily Time

Over the past twenty-five years, central bank communications have undergone a major revolution. Central banks that previously shrouded themselves in mystery now embrace social media to get their message out to the widest audience. The volume of information about monetary policy that the Federal Open Market Committee (FOMC) now releases dwarfs what it was releasing a quarter century ago. This chapter focuses on just one channel of FOMC communications, the postmeeting statement. It documents how this has become more detailed over time. Then daily financial-market data are used to estimate a daily time series of US monetary policy shocks. These shocks on Fed statement release days have gotten larger as the statement has gotten longer and more detailed, and the chapter shows that the length and complexity of the statement have a direct effect on the size of the monetary policy shock following a Fed decision.

scholarly journals Sharīʿah-compliant central banking practices: lessons from Muslim countries’ experience

2020 ◽  
Vol 12 (1) ◽  
pp. 7-26
Author(s):  
Zaheer Anwer ◽  
Shabeer Khan ◽  
Muhammad Abu Bakar
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Islamic Law ◽  
Financial Institution ◽  
Central Banking ◽  
Policy Implications ◽  
Content Type ◽  
Muslim Countries ◽  
Muslim Majority ◽  
The Government

Purpose The purpose of this study is to document how a central bank can perform its primary and secondary functions in a Sharīʿah-compliant manner. It also seeks to investigate the outcomes of the experiments of Muslim-majority countries in this regard. Design/methodology/approach As a first step, a detailed review of existing literature is conducted, which discusses the views of scholars and practitioners on the central banking mechanism in a fully Sharīʿah-compliant financial system. Moving further, the case studies of Iran, Sudan and Pakistan are presented to highlight experiences of regulators from three Muslim-majority countries, which aimed to achieve full compliance with Sharīʿah (Islamic law) principles related to Islamic finance. To evaluate their models, an assessment of their practices is performed in the light of Sharīʿah rules and principles based on existing literature. Finally, the issues involved in establishing a Sharīʿah-compliant central bank (SCCB) are discussed and improvements are suggested. Findings It is found that Iran played an effective role in pursuing broader objectives of monetary policy by setting priorities for credit allocation and assisting the government in reducing expenses; however, with respect to instruments, its experience is limited to the rebranding of conventional products. Sudan has not only used monetary policy to effectively curb inflation but also it has introduced various indirect instruments to perform monetary operations. Pakistan succeeded in formulating a theoretical roadmap to establish a SCCB but the desired objectives could not be achieved because of multiple factors. Practical implications This study has important policy implications for regulators and policymakers from Muslim countries, who can use the findings in shaping effective Sharīʿah-compliant central banking practices in their respective countries. Originality/value This study discusses the salient features of an important Islamic financial institution, the central bank and evaluates the experiments of three Muslim-majority countries in implementing Sharīʿah-compliant central banking practices. To the best of the knowledge, this evaluation has not been performed in the existing literature and the present study fills in this gap.

scholarly journals Central Banking and Crisis Management from the Perspective of Austrian Business Cycle Theory

2019 ◽  
pp. 550-584 ◽  
Author(s):  
Gunther Schnabl
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Crisis Management ◽  
Growth Dynamics ◽  
Central Banking ◽  
Business Cycle Theory ◽  
Price Inflation ◽  
Austrian Business Cycle Theory ◽  
Austrian Business Cycle

This chapter analyzes the evolution and effects of central bank crisis management since the mid-1980s based on a Hayek-Mises-Wicksell overinvestment framework. It is shown that given that the traditional transmission mechanism between monetary policy and consumer price inflation has collapsed, asymmetric monetary policy crisis management implies a convergence of interest rates toward zero and a gradual expansion of central bank balance sheets. From a Wicksell-Hayek-Mises perspective, asymmetric central bank crisis management has contributed to financial market bubbles, decreasing marginal efficiency of investment, increasing income inequality, and declining growth dynamics. The economic policy implication is a slow but decisive exit from ultra-expansionary monetary policies.

Lending to Private Borrowers and Other Private Assets

2019 ◽  
pp. 108-135
Author(s):  
Ulrich Bindseil
Keyword(s):  
Eighteenth Century ◽  
Central Bank ◽  
Commercial Banks ◽  
Recent Literature ◽  
Bank Lending ◽  
Central Banks ◽  
Central Banking ◽  
Time Section ◽  
Economic Rationale ◽  
The Subject

This chapter recalls the economic rationale of central bank lending to private borrowers (Section 4.1) and argues that the recent literature has often underestimated the importance of such lending by early central banks, without this implying that central banks were really competing with ‘commercial’ banks (Section 4.2). Finally, it illustrates pre-eighteenth-century awareness of the subject by reviewing the literature of the time (Section 4.3). Lending of central banks to private borrowers had a number of advantages relevant as of the first centuries of central banking: (1) providing an option for granular asset diversification and expansion, allowing thereby also to increase the monetary base; (2) generating income with limited risks; (3) improving the availability and pricing of loans for private debtors; (4) anchorizing the central bank in society. Lending to private borrowers took in particular the form of Lombard and discount operations.

scholarly journals Polityka pieniężna Narodowego Banku Polskiego od roku 1989

2015 ◽  
pp. 173-192
Author(s):  
Paweł Franka ◽  
Anna Wisz
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Exchange Rates ◽  
Inflation Targeting ◽  
Banking System ◽  
Policy Instruments ◽  
Open Market ◽  
The Past ◽  
National Bank

The article discusses the activities of National Bank of Poland during the past twenty-five year and more specifically in the years 1989–2013 with particular emphasis on monetary policy. During this time, the Polish central bank has undergone fundamental change, starting from the position of the so-called monobank, i.e. bank without autonomy in activities, characteristic of planned economy. The article describes the process of transformation of the National Bank of Poland to the role of a central bank operating in a market economy. The paper emphasizes all the important events in the transformation, including building of a two-tier banking system, the gradual replacement of the administrative measures by monetary policy instruments, currency denomination, constitutional guarantees of the role and independence of the National Bank of Poland, creation of the Monetary Policy Council – a departure from the single monetary policy-making in favor of collegiality, changing the monetary policy strategy to direct inflation targeting, bank exchange rates policy, open market operations.

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