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After more than two decades of inflation targeting in the world, it is important to evaluate if the adoption of this regime in a relevant developing country contributed to the creation of a better environment for the process of entrepreneurs’ expectations formation. Brazil is part of an important group of developing countries and represents a potential laboratory experiment in which the effects of an adoption of inflation targeting after more than a decade can be evaluated. Not enough is known about the consequences of inflation targeting credibility on both monetary policy and monetary policy transmission channels in developing countries that adopted inflation targeting. Emphasizing the role of transparency and the credibility of monetary policy as a performance criterion that motivate any country wishing to adopt an inflation targeting regime, this study leads to the fact that these two basic principles toward which a inflation targeting regime cannot be achieved without respect for certain pre namely institutional and technical conditions.
Profit And Loss Sharing As an Offshoot for Bank Stability: A Comparative Analysis
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The global crisis in 2007 has revived interest in the Islamic banking and finance industry. The profit and loss sharing (mudaraba and musharaka) attributes of Islamic banking and finance have shielded Islamic banks from the impact of a crisis. In other words, the Islamic banking system is stable by virtue of the profit and loss sharing principle. The relative stability of the Islamic banking model can also be deduced from the fact that the Islamic banking and finance system is effectively under the control of the authority of the central bank, which is not easily influenced by non-policy factors. This study concludes that a case for the superiority of Islamic banking has been made for example in Tunisia and Iran, where separate Islamic or interest-free counters were opened in all branches of commercial banks along with traditional or westernised interest-based banks. The substitution of western interest-bearing deposits by profit and loss sharing deposits connotes to the stability of the Islamic finance and banking system. The Islamic profit and loss sharing system does have merit and deserves attention from academics and policy-makers alike, especially in view of the financial crises and rampant bank failures.
This study contributes in the existing literature on the Islamic finance and banking law and the traditional or westernised interest-based banking system. This study documents that a case for the superiority of Islamic finance and banking has been made for example in Tunisia and Iran.