Discussion of the influence of culture on the international development and harmonization of accounting has focused primarily upon indigenous characteristics which are confined within national boundaries. But cultural inputs, such as religion, which transcend national boundaries, should not be overlooked. Islam is a particular case in point. Its principles commit Muslims to a definitive code of ethical commercial and personal behaviour affecting both the structuring and financing of business affairs between the faithful, and between Muslims and non‐Muslims. Islam has the potential for influencing the structure, underlying concepts and the mechanisms of accounting in the Islamic world. Its potential for influencing accounting policy is illustrative of religion as a confounding element in the analysis of national idiosyncrasies in accounting practice and in deconstructing the impediments to international harmonization.
Over the period 2000–2019, we reexamine the connection between finance, as measured by one of the primary banking sector functions—liquidity creation (LC)—and economic growth (EG) in 10 MENA countries panel. In a scenario seen as a dynamic heterogeneous panel, pooled mean group estimates demonstrate that LC and EG may have a favourable long-run connection while also having no influence in the short-run. In addition, results reveal an inverted U-shaped link between LC and EG over the short-term and long-term. This indicates that an excess of financial resources may be counterproductive to development in MENA nations.
Both real and monetary shocks have been extensively researched, with conflicting findings on the involvement of the banking sector following the occurrence of these shocks. Nonetheless, liquidity creation (LC) appears to be one of the most underappreciated banking operations. This research analyses the impact of LC on economic volatility and the mechanisms through which LC influences volatility in 10 MENA countries from 2000 to 2019. Using a recently published panel cointegration estimating approach, we show that LC does influence growth volatility over the long term and short term—in other words, LC, as a primary activity of banks, helps to reduce volatility. According to PMG’s findings, both real and monetary shocks significantly increase volatility in the short term compared to their influence in the long term. The channels of expression show that LC mitigates the influence of real shocks (amplifies the effect of monetary shocks) on growth volatility, and there is a greater magnitude of this effect in the short term. Strengthening the banking industry through LC, which is their primary business, could be a critical strategy in avoiding economic swings.
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