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An Economic Analysis Of A Pls Model For €˜The Financial Sector

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  • Shahrukh Rafi KHAN*

Abstract

This paper discusses the main analytical issues pertaining to PLS banking. The risk-return trade-offs and their bearing on the supply of funds are considered in a financial system where PLS deposits are the only income bearing financial asset. A PLS model is presented in which banks are pure intermediaries and the sole source of funds (mudarabah). The workings of this model is illustrated with some simple comparative static exercises. Other cases considered are where banks are not pure intermediaries and where entrepreneurs have their own source of funds in retained earnings (musharika). Some economic implications of PLS banking are suggested, including those that bear on the size and composition of total investment.

Suggested Citation

  • Shahrukh Rafi KHAN*, 1984. "An Economic Analysis Of A Pls Model For €˜The Financial Sector," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 3(2), pages 89-105.
    • Handle: RePEc:pje:journl:article1984winiv
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    Cited by:

    1. Mohsin S. Khan, 1997. "Islamic Interest-Free Banking: A Theoretical Analysis النظام المصرفي الإسلامي الخالي من الفائدة : تحليل نظري ( ترجمة عربية )," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 9(1), pages 3-36, January.

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