PDF logoEfficiency in Islamic and conventional banks: A comparison based on financial ratios and data envelopment analysis

by Jill Johnes, Marwan Izzeldin and Vasileios Pappas

Abstract

We examine efficiency in Islamic and conventional banks in the GCC region (2004-2007) using financial ratio analysis (FRA) and data envelopment analysis (DEA). From the FRA, Islamic banks are less cost efficient but more revenue and profit efficient than conventional banks. Bootstrapping confirms these small sample results. From the DEA, average efficiency is significantly lower in Islamic than conventional banks. A decomposition method new to the banking context shows that the efficiency difference is more a consequence operating under Islamic rules than of managerial inadequacies. Productivity growth has been slight, and is caused mainly by positive technology change.
 
The paper has been presented in:
"Second Workshop on Islamic Finance" on the 17th of March 2010 in EM Strasbourg Business School
Durham University at the Al Qasimi Building on the 17th of May 2010
Princess Sumaya University for Technology (PSUT), Amman, Jordan on the 19th of May 2010
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PDF logo Identifying Changes in Mean, Seasonality, Persistence and Volatility for G7 and Euro Area Inflation

by Erdenebat Bataa, Denise R. Osborn, Marianne Sensier, Dick van Dijk

Abstract

This paper proposes a new iterative decomposition that tests and accounts for multiple structural breaks in the mean, seasonality, dynamics and conditional volatility of an observed time series. Each component is considered separately within each iteration, which results in greater flexibility in the number and dates of breaks, compared with procedures based on a joint test for the stability of coefficients and volatility. When applied to monthly CPI inflation in G7 countries and the Euro area (aggregate), we uncover mean and seasonality breaks for all countries and, even allowing for these, changes in persistence are generally also indicated. Further, volatility reductions are widespread in the early to mid 1980s, with some countries exhibiting increases from 1999 onwards. A robustness analysis indicates that iteration provides more evidence of persistence breaks and generally fewer volatility breaks compared with the usual approach that sequentially examines mean, persistence and volatility changes for inflation, while application of linear seasonal adjustment also reduces evidence of persistence breaks.

PDF logo Changes in International Business Cycle Affiliations

by Erdenebat Bataa, Denise R. Osborn, Marianne Sensier, Dick van Dijk

Abstract

We investigate changes in international business cycle affiliations using an iterative procedure for detecting system-wide structural breaks. We analyze GDP growth rates in two systems, one with the US, Euro-area, UK and Canada and the other for the Euro-area countries of France, Germany and Italy. We discover that international dynamic interactions change in both the mid-1980s and early 1990s, with such changes being particularly important for studying influences on the aggregate Euro-area. However, contemporaneous (conditional) correlations between these Euro-area countries increase in 1984 and 1998, with a large increase in correlations also evident across the international system during the 1990s.

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