Reviews of mutual interest rate effects to macroeconomic variables in Islamic and un-Islamic countries

mohammadi, Hosein; mahmoudi, mehdi

doi:10.29252/jemr.7.28.103

Volume 8, Issue 28 (7-2017) jemr 2017, 8(28): 103-138 | Back to browse issues page

‎ 10.29252/jemr.7.28.103

‎ 20.1001.1.22286454.1396.7.28.4.8

Mendeley

Zotero

RefWorks

mohammadi H, mahmoudi M. Reviews of mutual interest rate effects to macroeconomic variables in Islamic and un-Islamic countries. jemr 2017; 8 (28) :103-138
URL: http://jemr.khu.ac.ir/article-1-1416-en.html

Reviews of mutual interest rate effects to macroeconomic variables in Islamic and un-Islamic countries

Hosein Mohammadi ^*

¹, Mehdi Mahmoudi²

1- Ferdowsi University of Mashhad , Hoseinmohammadi@um.ac.ir
2- Ferdowsi University of Mashhad

Abstract: (7015 Views)

Interest rate is one of the most important policy variabels in macroeconomic. Global financial crises and big debt in some countries around the world, make the importance interest rate more explicitly. In the carrent study, the effect of interest rate, inflation, government investment and expenditure on GDP capita per was investigated using panel data approach. Forthermore panel VAR method was used to consider the effects of each mentioned variables on each other and investigating causality relationships between these variabls. 20 Islamic and 19 Non-Islamic countries during 1990-2014 were selected for this study. The results show that in both Islamic and Non-Islamic countries, interest and inflation rate have a significant negative effect on GDP per capita. Government investment in both groups of countries have a significant positive effect on GDP per capita. These results are inline with economic theories. Finally, government expenditures in these groups of countries have different effect on GDP per capita. also lowering interest rate Non-Islamic countries has a considerable effect on other variables.

Keywords: Interest Rate, Per capita GDP, Inflation, Investment, Panel VAR

Full-Text [PDF 584 kb] (7290 Downloads)

Type of Study: Applicable | Subject: اسلامی
Received: 2016/05/16 | Accepted: 2017/08/15 | Published: 2017/09/17

References

1. Abounuri, A., Ghasemi Tazeh Abadi, A. (2008). Investigating causal relationship between interest rate and economic growth using panel data, Islamic Economics and Development Conference, Mashhad, Ferdowsi University of Mashhad, Faculty of Administrative and Economic Sciences,

2. Ali, S. Z & Anwar, S. (2013). Inflation and interest rates in the presence of a cost channel, wealth effect and agent heterogeneity. Economic Modelling, 31, 286-296. [DOI:10.1016/j.econmod.2012.11.022]

3. Anari, A & James K. (2016). Dynamics of Interest and Inflation Rates. Journal of Empirical Finance. [DOI:10.1016/j.jempfin.2016.08.008]

4. Arestis, P., Demetriades, P., Fattouh, B. & Mouratidis, k .(2002). The Impact ofFinancial Liberalization Policies on Financial Development. International Journal of Finance Economic, 121. [DOI:10.1002/ijfe.181]

5. Aron, J & Mullbauer, J. (2001). Interests Rates Effects on Output. Annual Research Conference, IMF.

6. Bakhshi Dasjerdi, R. (2010). Comparative study of zero interest rate theory with interest rate theory in Islam, Islamic Republic of Islamic Economics, 10(38): 61-88.

7. Barzani, M. & Izadkhasti, H. (2012). An Analysis Role of Interest Rate in Economic Banks of the Capitalist System: Islamic Approach, Journal of Islamic Economics, 44:77.

8. Baseri, B. (2003). Investigating Effect of Interest Rate on Macroeconomic Variables, Quarterly Journal of Research and Economic Policy, 11: 27.

9. Booth, G, Ciner, C. (2001). The Relationship Between Nominal Interest Rates and Inflation: International Evidence. Journal of Multinational Financial Management, 11:269-280. [DOI:10.1016/S1042-444X(01)00030-5]

10. Broga, K, M., Eduardo V., Henrik J, J. (2016). Model analysis of the link between interest rates and crashes. Physica A: Statistical Mechanics and its Applications, 457: 225-238. [DOI:10.1016/j.physa.2016.03.054]

11. Buncic, D., Philipp L. (2016). The Term Structure of Interest Rates in an Estimated New Keynesian Policy Model. Available at SSRN 2789342. [DOI:10.2139/ssrn.2789342]

12. Drakos, A, A., Georgios, P, K., Chris, T. (2014). Ownership, interest rates and bank risk-taking in Central and Eastern European countries. International Review of Financial Analysis.

13. Edisson, H. (1993). A re-assessment of the relationship between real exchange rates and real interest rates. Journal of Monetary Economics, Vol. 31. [DOI:10.1016/0304-3932(93)90043-F]

14. Espinosa, M & Yip, C, K. (1996). An Endogenous Growth Model of Money, Banking and Financial Repressio. Federal Reserve Banks of Atlanta,Working Paper, 96-40.

15. Evans, M & Lewis, K. (1995). Do Expect Shifts in Inflation Affect Estimates of the Long Run Fisher Relation. The Journal of Finance, Vol. 1, No.1. [DOI:10.1111/j.1540-6261.1995.tb05172.x]

16. Friedman, M. (1968). Dollars and Deficits, Hall. Inc, Englewood Cliffs, Newjersey.

17. Fry, M, J. (1982). Analysing disequilibrium interest-rate systems in developing countries. World Development, 10(12): 1049-1057. [DOI:10.1016/0305-750X(82)90017-1]

19. Fry, M, J. (1978). Money and Capital or Financial Deepening in Economic Development?. journal of Money, Credit, and Banking. 10(4): 464-475. [DOI:10.2307/1991576]

20. Ghani Nejad, M. (2003). Survey of theories related to banking interest rate, Proceedings of the Fifteenth Islamic Banking Conference, First Edition.

21. Giovannini, A .(1985). Saving and Real Interest Rate in LDCs. Journal of Development Economics, Vol. 18. [DOI:10.1016/0304-3878(85)90054-9]

22. Gojarati, D. (2013). Econometric Foundations, Translation by Hamid Abrishami. Tehran University, Vol. 2, Fourth Edition.

23. Gomes, V. (1994). Aggregate Consumption, Interest Rates and Inflation; in LCD's. Journal of Development Studies, Vol.31, No.1. [DOI:10.1080/00220389408422352]

24. Guan, G & Zongxia, L. (2014). Optimal reinsurance and investment strategies for insurer under interest rate and inflation risks. Insurance: Mathematics and Economics, 55: 105-115. [DOI:10.1016/j.insmatheco.2014.01.007]

25. Holtz, E, D., Newey, W., Rosen, H, S. (1988). Estimating vector autoregressions with panel data. Econometrica, 56(6):1371-1395. [DOI:10.2307/1913103]

26. Huang, W., André V, M., Khoa H, N. (2016). US stock markets and the role of real interest rates. The Quarterly Review of Economics and Finance, 59: 231-242. [DOI:10.1016/j.qref.2015.07.006]

27. Jabal Alami, F., Biriah, S. (2006). Estimation of demand function in Iran saffron importing by panel method in 1370-1380, Commercial Journal, 39: 109-134.

28. Kalbasi, H., Bakhshi, R. (2003). Scientific achievements about interest rate and its impact on inflation in Iranian economy state. Islamic Economics, 10: 101-112.

29. Karimzadeh, M., Nasrollahi, H., Samadi, S. (2012). Optimal Investment, Consumption and Gross National Product: Usage of Generally Pattern Remezy in Iranian Economy. Economic Research, 4(12): 1-25.

30. Katsikas, E., Brahma, S. B., & Wangeci, S. M. (2016). Effects of Interest Rates and Exchange Rates on Bank Stock Returns. Evidence from Kenya. [DOI:10.1016/B978-0-12-803776-8.00005-7]

31. Keshavarzian, P, A & Chanzagh, E, E. (2008). Effect Estimation of Interest rate on Investment and Economic Growth in Iran (Using Simultaneous Equation System). Economic Research, 31: 29-57.

32. Khavari, M. (2004).Interest rate and its impact on macroeconomic variables of Iran, Proceedings of 14th Conference on Monetary and Foreign Exchange Policy, Monetary and Banking. Research of the Islamic Republic Iran, First Edition.

33. Kim, J. (2015). Inflation Targeting and Real Interest Rate Parity: A Bias Correction Approach.

34. Lardic, S., Mignon, V. (2003). Fractional co integration between nominal interest rate and inflation: A re_ examination of the Fisher relationship in G7 countries. Economic Bulletin, 3(14):1-10.

35. Leiderman L & Blejer, M. (1987). The Term Structure of Interest Rates During a Financial Reform. Journal of Development Economics, Vol. 25. [DOI:10.1016/0304-3878(87)90086-1]

36. McKinnon, R. I .(2011). Beggar-thy-neighbor interest rate policies. Journal of Policy Modeling, 33(5): 759-775. [DOI:10.1016/j.jpolmod.2011.07.008]

37. McKinnon, R. I. (1973). Money and Capital in Economic Development (Washington, DC: Brookings Institution, 1973). McKinnonMoney and Capital in Economic Development 1973.

38. Mehregan, N., Ezzati, M., Asgharpur, H. (2006). Investigating causal relationship between interest rate and inflation: Using panel data. Economic Research, 6: 3.

39. Mehrara, M., Mosaie, M., Mohammadian, A., H. (2011). Investigating nonlinear relationship between interest rate and investment using threshold method (in developing countries). The Process of Economic Research, 19(58): 33-65.

40. Meysami, H., Mousavian, S., Abdollahi, M., Amrallahi, H. (2011). Analysis and Comparison of Legislative Experience and Supervision on Implementation of Islamic Banking in Countries. Journal of Islamic Studies, 4(8): 53-91.

41. Mihaylov, M. (2016). Determinants of loan interest rates in a country with a currency board: Evidence from Bulgaria. Economic Systems, 40(3): 355-372. [DOI:10.1016/j.ecosys.2015.10.002]

42. Mirakhoor, A. (2008). Cost of Capital and Investing in zero Interest rate Economy, Journal of Trends, 37: 138-154.

43. Mohammadi, H & Bahrami Nasab, M. (2013). Finding Factors Affecting in Export and Supply Demand Iran's Pistachio (VAR Approach). Agricultural Economics, 4: 23-42.

44. Mohammadi, H., Karbasi, A., Tali Moghadam, A. (2013). Applied Econometrics, Mashhad, Ferdowsi University Press, Mashhad, No. 614.

45. Mojtahed, A. (2004). Challenges and Requirements in Money and Capital Markets in Iran Economy, Proceedings of the Fourteenth Conference on Monetary and Foreign Policy, Monetary and Banking Research, First Edition.

46. Rabiei, M & Bidabad, B. (2009). Relationship between exchange rate and interest rate in Iranian economy (revaluation and development of quantitative money theory), Economic Research, 32: 67-96.

47. Ricardo, R., Roberto, G. (2001). Monetary Policy Transmison, Interest Rate Rule and Inflation Trageting in Three Transition Countries. Sep. 7. www.ssrn.com.

48. Saeedi, P., Mazhari, R., Valian, H. (2012). Investigating Relationship Between Inflation Rate and Interest Rate Based on Fisher's Theory in Iran Economic. Financial knowledge (financial studies), 5 (19): 83-98.

49. Samadi, A.S. (1989). Financial Repression and Economic Growth in Iran: McKinon-Shaw Pattern Evaluation, Program and Budget Science. 43-44.

50. Samati, M., Dalali Isfahani, R., Khoshakhlagh, R., Shirani Fakhr, Z. (2009). Analyzing causal relationships between macroeconomic variables in order to reduce interest rates in Iran using the Bayesian Plan (BCM), 44(86): 63-108.

51. Shadmehri, M., Fallahi, M., Khosravi, S. (2011). Hexao's causality test between interest rate and inflation for MENA group. Economic Growth and Development Studies, 1(3): 203-233.

52. Shaw, E, S. (1973). Financial deepening in economic development.

53. Shayan, Z, A., Kazemi, A., Jarjarzadeh, A., Ghabishavi, A., Gharafi, M. (2015). Effects Analysis of exchange rate fluctuations, foreign investment and oil revenues on GDP growth in OPEC countries with autogeneration approach. Economics Quarterly, 3 (11): 27-59.

54. Tajalli, A., Aziznezhad, S., Mirshamsi, A. (2010). Effects of Reducing Bank Interest Rate on Inflation, Employment and Investment, Tehran: Islamic Consultative Assembly, Research Center.

55. Tanweer, L & Huiqing, L. (2017). What keeps long-term US interest rates so low?. Economic Modelling, 60: 380-390. [DOI:10.1016/j.econmod.2016.09.017]

56. Tibebe A., Omar A. E., André, V, M. (2016). Stock returns and interest rates around the World: A panel data approach. Journal of Economics and Business.

57. Tilahun. T. (2016). Foreign capital inflows to the USA and mortgage interest rates. Journal of Housing Economics, 34: 1-14. [DOI:10.1016/j.jhe.2016.06.001]

58. Warman, F., Thirlwall, A. P. (1994). Interest rates, saving, investment and growth in Mexico 1960-90: tests of the financial liberalisation hypothesis. The Journal of Development Studies, 30(3): 629-649. [DOI:10.1080/00220389408422330]