Hasan Kiaee
Abstract
This paper focused on developing a model to study the effect of sukuk issuance on the inflation rate in top sukuk issuing Islamic economies at 2014. For this purpose, as the available sample size is small, a Bayesian approach to regression model is used which contains key ...
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This paper focused on developing a model to study the effect of sukuk issuance on the inflation rate in top sukuk issuing Islamic economies at 2014. For this purpose, as the available sample size is small, a Bayesian approach to regression model is used which contains key supply and demand side factors in addition to the outstanding sukuk volume as potential determinants of inflation rate. In the suggested model, inflation rate variable shows an apparent right skewness and the efficiency of log transformation for this variable is confirmed via Box-Cox approach. To give Bayesian estimators of the regression parameters, we have implemented an MCMC approach including 100,000 iterations in the WinBUGS software. The results show that sukuk volume is a significant determinant of inflation in selected Islamic countries, but only in the well-developed capital market economies its increase could decline the rate of inflation and so sukuk could be used as a policy instrument for controlling inflation. Also the Bayesian estimation of the other parameters shows that increase of money growth and exchange rate growth lead to higher inflation rates.
