THE PANDEMIC AND THE ECONOMIC CONUNDRUM: HOW ISLAMIC FINANCE CAN HELP

This paper examines the economic and financial impact of the COVID-19 pandemic and the responses that governments undertook. Though large and unprecedented in size, policy response has mostly been the same. Huge monetary stimulus, rate cuts, direct market intervention like bond purchases and debt moratoriums. Many of these were techniques used in the previous global financial of 2007–2009. Economies were already fragile and in a vulnerable state when the pandemic struck in late 2019. Continued use of the same policies did prevent a potential meltdown but has increased system vulnerability. The global debt burden is now much larger but governments may have fully expended all their monetary ammunition. Fiscal stimulus though much needed and more appropriate is seriously constrained by budget deficits and lack of fiscal space. Adding more debt to fund fiscal expansion is not really an option. Yet, the pandemic has made vulnerable, several parts of the economy that need to be salvaged. The SME sector which forms the spine of most developing economies is verging on collapse due to cash flow disruptions arising from lockdowns. The domestic banking sector which had funded these SMEs is exposed to a potential meltdown unless restructuring is done. The loan moratoriums widely adapted do not solve but merely postpone the problem. Governments, given their precarious fiscal position are in no position to provide the huge financial infusion needed to shore up the SMEs and banks. Islamic finance, which has risk-sharing alternatives can provide a way out of this conundrum. The paper proposes a shariah compliant risk sharing alternative to resolve this problem.

COVID-19: A HEALTH PERSPECTIVE

A severe pneumonia of an unknown origin was reported in Wuhan, China in December 2019. The disease, now known as coronavirus disease 2019 (COVID-19), has evolved into a public health emergency of international concern and wreaked worldwide havoc. An unprecedented and vigorous scientific response has allowed the accelerated discovery of the virus and reliable diagnostic methods; a rapid characterization of the disease and its impacts so as to better apply precautionary and public health measures; and resulted in remarkable progress in the development of mitigation strategies, including the development of vaccines at breakneck speed. This paper provides a health perspective of the virus and the pandemic it caused, based on available best evidence. Controversies surrounding the origin of the virus, its incubation period and infectivity, presentation and course of the disease, testing, as well as treatments and vaccinations are highlighted. The pandemic response, including infection control measures, and considerations on mental and economic health, alongside physical health is discussed. Moving forward, it is important that the global community is aware and better informed. More resources are needed to strengthen public health systems and healthcare infrastructure and delivery. This virus has the potential to persist and become endemic and seasonal in communities. Thus, non-pharmaceutical interventions (e.g. wearing masks, frequent hand washing, etc.) might become the new normal in a post-pandemic world. The silver lining in the COVID-19 cloud may be the lessons it provides, so that we may be better prepared to respond to an inevitable next pandemic.

THE CORONAVIRUS RECESSION IN THE U.S.: IS THERE A LONG-RUN FOOTPRINT?

The U.S. coronavirus recession began in late February of 2020 and was over in two months. The rapid recovery was due to the Coronavirus Aid, Relief, and Economic Stability Act (CARES Act), a large fiscal stimulus program initiated in late March 2020, that was accompanied by a strong expansionary monetary policy. This paper advances the notion that although the Corona-Recession was historically short it had two more permanent—longer-run—impacts that have largely been ignored. First, it accelerated two emerging trends—expansion of remote work, and more rapid adoption of digital technologies—and each will have a profound effect on work, society, and well-being in the U.S. Second, the pandemic-fuelled downturn fostered a new pathway—loneliness and social isolation—that exacerbated the emotional health concern that is part of all recessions, especially for younger persons. This occurrence is also likely to have an enduring footprint on economic and social life.

NOVEL CORONAVIRUS (COVID-19) SHOCK AND REVERBERATIONS IN PAKISTAN

Nearly a century after the Spanish flu of 1918, the world is confronting reverberations of the pandemic caused by the novel coronavirus, labeled as COVID-19. As time passes, there has been a serious loss of life and well-being all across the world. According to the latest data issued by the Johns Hopkins University, more than 185 million people have been infected and slightly over 4 million people have already lost their lives. With some respite during the July–October 2020 period, the world economy is once again plunging down as a result of subsequent waves of the pandemic. According to the World Bank (WB) and the International Monetary Fund (IMF), the world GDP has already suffered a loss in the range of US$8–12 trillion due to disruptions in economic activities. Even though Pakistan is among those countries where a relatively mild health-related impact was recorded during the first wave, the situation is fast deteriorating on the health and economic fronts with the severity of the latest wave. The objective of this study is to capture the impact of COVID-19 on the healthcare system and the economy of Pakistan. In particular, an attempt has been made to understand how this new normal situation has encouraged e-commerce (online) commercial and trade activities, on the one hand, and inculcated the concept of work from home among the corporate and public sector employees, on the other. The initial evidence confirms that despite a limited support from the formal banking and financial sector due to insufficient financial deepening, the commerce and trade sector has recorded a substantial growth in its online transactions. Moreover, in view of the contagion hazard, a large number of corporate entities and most of the education sector employees have been allowed to work from home thereby challenging the orthodoxy about shirking and mistrust.

DIFFERENTIAL IMPACT OF COVID-19 IN AUSTRALIA: EVIDENCE FROM GOOGLE SEARCH DATA

Quantifying the immediate economic impact of COVID-19 is important to design proportionate relief and support policies. However, surveys of businesses and households are only typically available after considerable delay. We use near-real-time Google search data to examine the temporal and spatial impacts of COVID-19 on service sector activity in Australia. We find that the travel-related and consumer-facing sectors, such as aviation, tourism, hotels, restaurants, and retail trade, suffered steep contractions during the outbreak. By contrast, sectors that involve less physical and face-to-face interaction, such as info-communication technology (ICT) and delivery services, experienced significant gains. The magnitude of the impact is large. During the first COVID-19 wave between January and March, the demand for air travel, tourism, and hotel accommodation declined by 60–80%, while the demand for ICT and delivery services surged by more than 50%. In states and territories with low caseloads, the impact has also been severe due to government-enforced nationwide social distancing measures to contain disease spread. However, in states and territories that eased restrictions earlier and faster, there has been no significant reduction in demand for certain consumer-facing services. Our findings demonstrate the usefulness of high-frequency and near-real-time indicators in monitoring the rapidly unfolding effects of COVID-19.

Ownership Structure and Dividend Policy in Listed Industrial and Consumer Goods Firms in Nigeria: Heckman’s Two-Stage Approach

The decision on the magnitude of dividend has been identified to be highly related to the decisions to pay or not to pay dividends in formulating dividend policy. However, literature seems to be homogeneous and focused on examining the effect of ownership structure on dividend level or probability of paying dividends. Therefore, the paper examines the effect of ownership structure on dividend policy using Heckman’s two-stage technique. Utilizing 304 firm-year observations from industrial and consumer goods firms listed in the Nigerian Stock Exchange for the period within 2009-2019, the result shows that in the first stage, only foreign ownership has a negative significant effect on the probability of paying dividends. However, after accounting for a possible correlation between the probability of paying dividends and dividend pay-out, the result on the second stage exhibits a significant negative effect with block-holders and foreign ownerships on dividend policy while institutional ownership reveals a positive significant effect. The overall results show that the lower the foreign ownership the higher the possibility of paying dividends. Also, higher dividend pay-out is associated with the lower level of block-holders and foreign ownerships coupled with higher institutional ownership in listed industrial and consumer goods firms in Nigeria.

Employer Satisfaction in Brunei Darussalam

Brunei Darussalam’s Long-Term Development Plan 2035 outlines the Ministry’s goals for the national education system to prepare Bruneian youths for employment and to embrace Malay Islamic Monarchy (MIB) as a concept that guides one’s way of life. Keeping that in perspective, a research was initiated to find out employer satisfaction on employees in Brunei. Employer data and contact details were collected through various database, yellow pages and social media. Broadly, this study supports the established Input-Environment-Output (IEO) model in evaluating employer satisfaction in Brunei Darussalam. The study analyzed data from 454 employer self-reports from private and public sectors with a diverse employer profile and 24 employers were interviewed. Employers were asked to rate their satisfaction with the 24 competencies the graduates employed in their respective companies possess. The highest level of employer expectation in job competencies were communication abilities, problem solving skill, commitment, self-confidence, managerial skills, time management, creativity and innovative, knowledge of specific computer applications, punctually and specific technical knowledge. The analysis of this study shows that employers are mostly satisfied. A set of recommendations were also formulated based on the results of the study.

The Time-Variant Sources of Inflation and Inflation Volatility and Their Interrelations and Effects on Macroeconomic Fluctuations: Evidence from Indonesia and Thailand

Indonesia and Thailand, two major open economies in Southeast Asia which operate under ‘managed-float’ exchange rate systems, have remained susceptible to both the external and domestic shocks since the East-Asian financial crisis of the late 1990s. Unlike the standard monetary-policy literature, these countries have introduced ‘flexible inflation targeting’ as the monetary policy strategy under managed-float exchange rate systems. Although these countries have managed to keep inflation low on average in a low-inflation environment, inflation has however remained highly volatile. This paper attempts to answer how significant are external shocks, relative to domestic shocks, as the drivers of inflation and inflation volatility for these countries? The paper uses a Structural Vector Autoregression (SVAR) modelling framework and monthly macroeconomic data over the period 2000M1-2015M12. The empirical results suggest that in both countries, (i) inflation is more sensitive to external shocks relative to domestic shocks, which is consistent with the inflation globalization hypothesis; (ii) Inflation volatility however remains sensitive to both the external and domestic shocks; (iii) As expected, inflation and inflation volatility exhibit a feedback relation between them, which is consistent with the Friedman‐Ball and Cukierman‐Meltzer propositions. The paper also highlights that inflation and inflation volatility affect the real interest and exchange rates, which affect real output and asset prices. The paper concludes that Indonesia and Thailand can make monetary policy more effective for maintaining price stability if they make the exchange rates more flexible to ameliorate the effects of external shocks on these economies