Journal of Money & Economy
Volume:6 Issue: 2, Winter 2012

Re-denomination was not only a zero dropping and new coin minting operation but also a significant milestone in Turkey. Before the currency reform, multiple zeros had posed several difficulties in expressing monetary values, transactions, bookkeeping and statistical records, data processing software, payment systems, price labels etc. So, removing six zeros from national currency became a technical and psychological need in Turkey.In the first phase of the currency reform, six zeroes were removed from the national currency and the prefix “New” was added to the currency’s name as of January 1, 2005. At the beginning of the reform, it was also decided that in the second phase, the prefix “New” used during transition period would be removed and traditional currency name, “Turkish Lira” would be reverted back. For that stage of the reform, the Council of Ministers took the decision and the operation started on January 1, 2009.

In this paper we empirically examine the effect of various banking policies on financial sector development. To this end, an econometric model in the context of Co-integrated VAR is employed. The results show that financial liberalization and reforms have a significant and positive effect on the banking sector development while inflation rate has a negative effect. Furthermore, the high GDP per capita as a measure of economic development has a positive effect on financial development indicating that the more developed the economy, the more incentive for policy makers to implement financial reforms and thus develop financial sector. This finding is consistent with demand following view.However, since the current structure of Iranian banking system is not competitive, in order to implement financial liberalization policy, the policy makers should be careful and consider some prudential regulations, supervision and other macroeconomic conditions.

The exchange rate regime in Iran is practically fixed. The Central Bank of Iran (CBI) has committed itself to trying to bring about a particular exchange rate regime to meet two important targets: 1. Sustaining competitiveness of the economy, 2. Acquiring the share of foreign reserves in monetary base in a predetermined level. Since 2001 the share of foreign reserves in monetary base has increased, which suggests that the sensitivity of CBI toward its second target should have also increased. This study tries to test whether this hypothesis is statistically significant. A Markov Switching model is used to test this hypothesis. The results show that from 2001 the sensitivity of CBI toward its second target has increased significantly, while its sensitivity toward the first target has decreased.

The time to fix the roof is when the sun is shining; risk management has not been uppermost on the Islamic banking sector’s agenda in recent years. It is crucial for Islamic banks (IBs) to have comprehensive risk management framework as there is growing realization among IBs that sustainable growth critically depends on the development of a comprehensive risk management framework. Islamic banks should be dusting off their ladders now. If Islamic banks are serious about playing a greater role in the financial system, they will need to get to grips with risks which may not currently be well understood or well managed. In this paper a frame work for Risk management in Islamic Banks will be discussed firstly, then generic risk associated with banks and unique risks exposed to Islamic Banks will be categorized.The contractual complexity of Islamic banking transactions which gives rise to awkward operational risks, and the uncertainties associated with Shariah compliance leave them exposed to a few risks including fiduciary and reputational risks which will be briefly reviewed in the paper. Although Basel II standards, do not account for the specific risks related to the nature of Islamic banks’ activities however the fundamental tenet of Islamic finance is that of fairness, and Islamic financial institutions at a most basic level are often structured towards fee-based revenues for services rendered and profit- and loss-sharing structures. Thus, in essence, Islamic financial institutions are closer in spirit to asset management companies than to conventional banking institutions, and the impact of their operations on the balance sheet is unique. These particularities highlight the unique characteristics of Islamic banks and raise serious concerns regarding the applicability of the Basel methodology to Islamic banks. Islamic banks’ activities differ in substance and in form from conventional banks’ operations and they thus face a different risk profile. Then the paper gets grips with Basel II accord and share challenges on adopting Basel II in Islamic Banks.

Financial markets have been developed rapidly in recent years. New and sophisticated financial tools have been the cause of these developments which need new controlling systems to prevent crisis. Most of industrial economies have reformed regulatory structure of their financial systems.This paper reviews the regulatory developments of UK in this regard and offers new regulations and accounting standards concerning financial activities. These regulations have undergone significant structural financial reforms over the past three decades principally aimed at changing the architecture of the financial sector and encouraging greater competition. These reforms offer a unique setting to explore empirical evidence from experiments with competing theories of regulation; that is, studying the real world challenges and the pros and cons of self-regulation on the one hand and state intervention and public regulation on the other.One of important issues considered here is the contagious effects of crises from sector to sector, and from country to country which should be prevented by new effective regulations. Monitoring financial firms and their scale and domain of economic activities can prevent or reduce this domino effect.

This paper examines the effects of selected macroeconomic variables on the stock market index in Iran. Using quarterly data, we examine the relationships between the Tehran Stock Index (TSI) and five macroeconomic variables which consist of gross domestic product, nominal effective exchange rate, money supply, gold coin price and investment in housing sector from 1996:1 to 2008:1.Various econometric analyses such as Co-integration and Vector Error Correction Method (VECM) are employed on time series data. It finds that Iran’s stock market index is positively influenced by the growth rate of the GDP, the money supply and negatively affected by the gold prices, the private sector investment in housing sector and the nominal effective exchange rate.

The recent financial crisis has shown that the reforming in regulation and supervision is essential. This paper studies whether banking regulation improves bank soundness or more regulation lead to decrease soundness of banking. Specifically, countries which require banks to report regularly and accurately their financial data to regulators and market participants have sounder banks. In this paper, we test the quadratic relationship between regulation and sound banking with a panel data model during (2000-2009) for selected countries. The dependent variable in the study is the bank’s financial soundness as measured by its Z-score. These findings emphasize the importance of regulation on banking system. The results show that regulation and financial soundness have significantly quadratic form because the sign of regulation-squared coefficient is gative and sign of coefficient of regulation is positive and significant, it could be said that quadratic hypothesis of above relationship cant be rejected.