Genuine Progress Indicator vs. GDP Quantification of Economic Performance

As we know, Malaysia and South Korea, successful graduates of Asian Financial Crisis, employed different paths to recovery via Capital Control and IMF bail-out respectively. This paper tracks recovery trajectories of the two nations via orthodox and emergent growth indicators: GDP and GPI. We report unemployment, open-trade, fixed capital accumulation, and prior crisis to be influential determinants of both metrics, while credit and foreign exchange rate lack significance.
The 1997 Asian Financial Crisis serves as a pivotal point for measuring economic performances of most of its crisis-struck constituents. Within this literature, of particular import are Malaysia and South Korea—having applied dissimilar antidotes. The former adopted independent (capital controls) recovery plans, while Korea adopted the IMF treatment. Post-crisis, both nations are regarded as success stories, having achieved rapid growth, despite taking different routes, as measured by medium-term rates of GDP growth within a decade (Zumkehr & Andriesse, 2008).

The traditional yardstick of quantifying economic growth, GDP—along with its various derivatives like GNP and GNI, faces competition today from a number of alternative metrics. Economists and development experts of various disciplines, ranging as far back as 1960s, objected to multiple limitations of GDP as an economic performance measure. Most notably, sustainability advocates underscore GDP’s shortfalls as a general metric for well-being. These concerns have led to the experimentation and development of an eclectic array of indices for policy legislation from the 1970s onwards. Among them, Genuine Progress Indicator (GPI) has been demonstrating a rise in prominence as an alternative performance measure, particularly through reproduction at various regional and national levels as listed in Posner & Costanza (2011) and Bleys & Whitby (2015). Despite growing interest, quantification and adoption of GPI is very much in its infancy. Moreover, GPI figures are uncalculated for a great portion of world economies. For Malaysia and South Korea in particular, there are calls from academia and policy levels for development of GPI indices (Othman et al., 2014; Feeny et al., 2013).

GPI is best defined in its general framework based on the work of Talberth et al. (2007). As the metric’s parametrization is still a “work in progress,” a consensus on GPI’s definition is yet not reached. As such, countries applying the GPI measure broadly rely on the precedents set by other bodies and calibrate to suit its unique environment. Hence, a component of GPI for a country might not be the component for another country. Empirical attempts till date mostly use the same personal consumption data as GDP but make additions to account for the services from consumer durables, public infrastructure, volunteering, housework values, deductions to account for income inequality and costs of crime, environmental degradation, and loss of leisure. Its advocates claim that by incorporating the forestated variables this indicator better reflects sustainability performances of an economy.


In this paper, we construct GPI for South Korea and Malaysia from 1980 to 2014. Notwithstanding a few omissions in GPI components owing to data unavailability, we find GPI curves to be lower than their GDP counterparts. Our panel estimations reveal that external debt has a direct relationship to both GDP and GPI in the long term. However, capital controls are insignificant to both GDP and GPI measures. The results also suggest that unemployment rate, trade openness, fixed capital formation and history of previous crises are influential drivers of GDP and GPI. Credit and exchange rates, however, show inconsistent effects in GDP and GPI. Further explanation is by answering the three following questions.


Hashim, M., Sifat, I., & Mohamad, A. (2018) Tracking Genuine Economic Progress for IMF Debt or Capital Control: The Cases of Malaysia and South Korea. Economics & Business Letters, 7(4), Oviedo University Press.

(DOI will be updated later once assigned by the journal)

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Revisiting Fiat Regime’s Attainability of Shari’ah Objectives and Possible Futuristic Alternatives

Maqasid of Shari’ah is a millennium old theory on the higher objectives of Islamic divine law. As the discipline of Islamic economics and finance grew in politico-economic importance in the past three decades, a cathartic trend has emerged among Muslim experts to realign economic and financial practices with not merely the minimum legal requirements of religion but also the wisdom and crucial objectives of Shari’ah. An expositive example of this is the monetary economics debate of a Shari’ah consonant currency. Though vast majority of religious clerics have approbated fiat and paper currencies in strict legal terms since the 1980s, a revisionist movement since the mid-1990s seeks to counter it—some going as far as indorsing reversion to gold and silver coinage of medieval Islamic epoch of affluence. Unlike orthodox fiqhi (strict jurisprudentialism) approach that involves legalese with little leeway, Maqasid approach concerns itself with the spirit of the law. This paper operates in the exciting laboratory of Maqasidic framework to appraise the multitudinous role of fiat currency in protecting economic, political, and social public interests, prevention of harm, promotion of egalitarianism, and attainment of ultimate utopic vision of theological and spiritual demands in Shari’ah. The paper contributes, theoretically, by introducing several moral-philosophical arguments against fiat’s compatibility with Shari’ah, and, practically, by prognosticating the future course of discourse in light of advancements in technological innovations—including nascent crypto-currencies.

SCImago Journal & Country Rank

Legal and Practical Issues with Hire Purchase Financing Products Based on Sharikah al-Milk

Undergoing Revision at Arab Law Quarterly

Keywords: Sharikah al-Milk; Hire Purchase Financing; Islamic Finance Instrument; Legal Issues


Since its inception in the 1960s, realization in 1970s, growth in 1980s, and proliferation
in 1990s, the Islamic banking and financial industry has been experimenting with a
range of financial instruments based on contracts, principles, and precedents of
Shari’ah. Bulk of these involve customizing classical Islamic transactions and refitting
them into conventional-esque products. The Islamic equivalent of hire-purchase is one
such innovation. More specifically, this paper focuses on the legalistic, juristic, and
practical issues surrounding hire purchase through Sharikah al-Milk (HPSM), an i-hirepurchase instrument which employs three contracts consecutively: lease, sale, and
partnership. Essentially spawned as a competitor to the hire-purchase conventional
products, HPSM products have been successful in attracting consumer attention
worldwide. Despite being a marketing success, legal issues persist with this product,
such as conjoining multiple contracts into one, legal status of a wa’ad (promise),
conflation of gift as a sale contract, conditional sales’ validity, etc.

Magnet Effect of Price Limits: Evidence from 150 Active Stocks in Bursa Malaysia

Since the late 1980s it has become a common practice worldwide—especially in frontier markets—to impose circuit breakers on stock prices, effectively stunting its intraday growth or decline beyond a certain bracket. Ostensibly, its purport is to prevent investor overreaction, regulatory control of market micro-structure, prevention of crash, and to smoothen excessive volatility. The most ubiquitous form of circuit breaker is price limit, which is used in equity and futures markets. The ranges of existing price limits vary geographically and from exchange to exchange. Academics and regulators have divergent opinions on application of circuit breakers and its resultant positive or negative effects. A lot of academic studies claim circuit breakers have the opposite of intended effects—i.e. they result in attracting prices to the limits by their very existence and thus defeating the volatility tempering objective. Utilizing Historical daily price from 1994 till 2017 in Bursa Malaysia, we employ a probabilistic regression approach to check whether magnet effect exists. Having divided the study period into 3 distinct regimes based on regulatory limit mechanisms, we find evidence of strong magnet effect in Bursa Malaysia throughout the periods, with heightened magnet effect between 2002 and 2013. Also, for all sample regimes, we find magnet effect more pronounced in bullish scenarios compared to bearish ones.

Presently under review at Global Business Review

Circuit Breaker Research

My Doctoral dissertation is a compendium of essays pertaining to  an oft-implemented intervening instrument in financial market microstructure: circuit breakers. Inspired by electrical engineering use of a fuse to prevent damage to a circuit by current overflow, financial regulators and exchanges, since late 1980s, began employing mandated collars to prevent price fluctuation beyond a bracket deemed reasonable. This practice, though widespread in equity and futures markets, is controversial. Proponents claim it endows a propitious time-out when asset (or market) prices are stressed and persuades traders to make rational trading decisions. Opponents demur its potency, castigating it a barrier to laissez-faire price discovery process. Due to conflicting empirical evidences, difficulty in measuring counterfactuals, and a host of statistical methodological constraints, financial economists and industry experts are forked in their views regarding circuit breakers’ efficacy. Nonetheless, the practice is a clear favorite among exchanges and regulators, as substantiated by the staggering pace of adoption since the mid-1990s and nigh-zero evidence of an exchange abandoning it altogether. The last few remaining major bastions of anti-circuit breakers too have recently succumbed to the cry for greater regulation; case in point: Singapore Stock Exchange (SGX) and Australian Stock Exchange (ASX). In academia, meanwhile, the topic shows patterns of seasonality. Empirical works examining performances of regulatory rationales, such as deterring volatility, enhancing price discovery, interferences in trading, and a self-fulfilling gravitational pull (dubbed the magnet effect) seem to mushroom soon after headline-grabbing financial crises or flash crashes (as in May 2010 in the US). In fact, theoretical work in the field stagnated in the late 1990s, as empirical works to test them were difficult to undertake due to lack frameworks, acute paucity of data, and failure to address statistical constraints. The 2000s witnessed a slew of empirical works, mostly from the pacific basin markets, as time-series datasets became more accessible. Though Asian markets such as Korea, Taiwan, Tokyo, Shanghai, and Shenzen dominate the studies with mixed results, the only study undertaken in Malaysian market by Chan et al. (2005) found evidence of deterioration in market quality, using transaction data from 1995. Since then, KLSE has become BM, trading platforms and environments have grown sophisticated, and circuit breaker regime in the bourse has undergone multiple tweaks. Despite the changes, the limit of ±30% is intact since 1989, albeit with some qualifications. 

The Malaysian praxis is rather confounding for following reasons:

  • most exchanges prefer a very tight collar
  • many exchanges experiment with the limit in tranquil times, presumably in quest of an optimal collar
  • advanced exchanges commission studies corroborating the efficacy of the proposed regime and make the results known
  • most exchanges play with the circuit breaker around market crash periods to forestall the crash or reinforce traders’ confidence.

Somehow, Bursa Malaysia did none for nearly 3 decades, inviting us to question:

Does the price limit in Malaysia really work in achieving its professed objectives?

Is ±30% really the sweet spot? If so, why does everyone else prefer a tighter band?

My dissertation attempts to quench these queries. The corresponding pursuits-essaywise-are as follows:

In this essay, I delve into a synthesis of research, global and regional practices of circuit breakers and its many sub-variants, regulatory rationale, and methodological impediments to finding defensible answers to the regulatory incredulity of academic findings. 

In this essay, I use historical daily data from 1994 to test major hypotheses in the field: volatility spillover, trading interference, and price discovery. However, the approach isn’t the run-of-the-mill before-after event study. Instead, the whole sample period is bifurcated according to calm and crisis periods. After all, the purport of circuit breakers is to prevent crashes, and their efficacy is tested the most in turbulence. The results are mixed to varying degrees of statistical robustness with no clear indication of improvement in stopping volatility to spill over the subsequent trading days, delay in emergence of equilibrium price, or interference in trading. 

This essay utilizes proprietary high-frequency intraday data from January 2015 to August 2017 to examine existence of magnet effect and finds lack of evidence supporting the magnet effect hypothesis for majority of limit-triggered stocks. 

Lastly, the overall performance of different circuit breaker regimes in promoting efficient pricing via random walk is examined for affected stocks through a battery of parametric and nonparametric tests. The evidences favor the regulatory practice and indicate a liberal band corresponds with propensity for greater random walk. 

The results, overall, appear to vindicate Bursa Malaysia’s choice of circuit breaker and its nuanced praxis, contrary to earlier findings. The results are thus far preliminary and further tests are on-going to ensure rigor. A fair matrix of conslidated findings will be updated here once results are double-checked. Also, policy implications will be expounded upon both from local, ASEAN, and global perspectives.

Price Discovery

Essay 2
  • Upper limits: mostly no
  • Lower limits: mostly no

Trade Interference

Essay 2
  • Upper limit: mostly no
  • Lower limit: mostly no
  • Crisis-prone

Magnet Effect

Essay 3
  • Upper limit: moderate magnet effect
  • Lower limit: moderate to high magnet effect
  • Vortex zone: 7-10 ticks or 19-23% Δprice

Random Walk

Essay 4
  • Upper limit: mostly no
  • Lower limit: mostly no
  • Subpar performance in bearish markets
  • Limit-triggered stocks outperform the broad market in following a random path

Stale News Hypothesis in Selected in FTSE/ASEAN 40 Stocks


This paper examines the influence wielded by social media buzz on stock market performances of selected stocks from several ASEAN stock exchanges. The advent of social media has changed the dynamics of information propagation and utilization in stock markets. Though information asymmetry still persists, current literature has only recently caught up with the dominant trend of social media eclipsing traditional media as a source of information. This is an issue of significant complexity and import for stock market actors. Employing a brand-new theoretical model of predicting impact of social media on asset prices—proposed by Jiao, Veiga and Walther—this study gauges the performances of stocks with active social media coverage for a month and finds abnormally high trading volume and volatility in the ensuing month. Though these findings are statistically significant in confirming stale news hypothesis by Tetlock (2011), this study is the first empirical application of Jiao et al.’s model. Therefore, after discussing the implications of these findings, this paper highlights the need for more replication studies to help develop a social-media related theory on asset prices and how this affects regulators’ responsibility of ensuring fair dissemination of information.