Band 12, Heft 1 -

With the entry into force of the Pan Arab Free Trade Area (PAFTA) in 2005, intra-Arab trade became tariff free, completing the trade liberalization process started in 1998. Making use of data covering the 1998–2012 period, we estimate the impact of PAFTA on intra-Arab trade in manufactured goods using a gravity model and applying panel data estimation techniques. Results suggest that PAFTA has increased intra-members’ trade by nearly 20 %. We also examine potential changes in the trends of Arab countries’ imports of manufactured goods from their main providers after the entry into force of PAFTA. In this respect, there is some evidence of an increase in Arab countries’ imports from Asia from 2005 onwards, in relation to the 1998–2004 period.

In most countries, taxes on interest income are subsumed under the general income tax structure. In Lebanon, there is a departure from such a policy, and these taxes are not imposed as part of taxable income but are levied at source on interest from deposits at commercial banks. As a result, this necessitates the derivation of a theoretical model on the subject of this tax that must be applicable to Lebanon. This is the first intent of this paper. As such, the paper develops a model that attempts to maximize the tax revenue from a given tax rate and to minimize the deadweight loss from this tax. From this theory, the relevant parameters that affect the optimal tax rate are found to be the interest rate elasticities of deposit supply and demand. Assuming, as the case for Lebanon indicates, that the interest elasticity of demand for deposits is infinite, and conditioning on other exogenous variables, the own and cross interest elasticities of deposit supply are estimated by advanced econometric techniques. The results show that the optimal tax rates differ markedly for the two denominations of deposits, the one in Lebanese pounds and the one in foreign currency. The optimal tax rate is higher for the latter, and both rates are much higher than the actual rate, or even the proposed rate. The paper concludes that, although tax authorities in Lebanon can theoretically raise substantially the tax rate in order to increase tax revenues, other economic and political considerations limit to a large degree the liberty of implementing such a raise.

This paper examines the effect of institutional quality on lending by banks in Gulf Cooperation Council (GCC) group of countries. The methodology included the estimation of a reduced form regression equation utilizing cross country data for a range of variables capturing institutional quality. The empirical findings provide evidence that conventional institutional quality measured by: the time taken to enforce a contract, regulatory quality, the rule of law and government effectiveness; are inversely correlated with the lending by the banks, among other factors. Interestingly, our findings revealed that Sharia financing legislation to be positive and statistically significantly correlated with bank lending. Our main policy implication is that strengthening the domestic conventional institutional quality in the GCC countries is vital in order to facilitate effective lending by banks.

There is a long tradition in detecting anomalies of the Efficient Market Hypothesis. Among these are calendar anomalies, first described by French back in 1980. Whilst there is a plethora of studies for well-developed stock markets, there is still a lack of comprehensive studies for some small or emerging financial markets. It is particularly interesting to test not only for calendar effects in the conventional Gregorian calendar but also in other calendars like the Hijri calendar. Thus, the aim of this study is to provide a comprehensive analysis of calendar anomalies on Islamic stock markets. Firstly, we deliver a complete literature review of previous studies dealing with calendar effects on Islamic stock markets showing that there is still a lack of consensus about the effects. Secondly, we analyse whether there are any seasonal patterns in stock markets’ returns by conventional estimation techniques. Thirdly, we study whether those calendar effects are still apparent when we control for volatility clustering. In fact, there is evidence for calendar anomalies on all stock markets. However, those effects are prone to changes when different models or distributions are used. One should, therefore, be careful when interpreting calendar effects on Islamic stock markets. The evidence for theories put forward when analysing Western stock markets is – at best – mild.