![Levy Economics Institute of Bard College, a nonprofit, nonpartisan, public policy think tank founded through the generous support of Bard College trustee Leon Levy Levy Economics Institute of Bard College, a nonprofit, nonpartisan, public policy think tank founded through the generous support of Bard College trustee Leon Levy](https://www.levyinstitute.org/images/levy_logo.png)
Publications
Financial Stability: The Significance and Distinctiveness of Islamic Banking in Malaysia
This paper explores the significance of Islamic banking in Malaysia for stability in the country’s economy as a whole. Neither conventional theory nor Islamic economics puts forward a systematic explanation of financial intermediation; consequently, neither is capable of identifying destabilizing elements in the system. Instead, a flow-of-funds approach similar to Minsky’s own is applied to the (post-) modern (consumption-led) business cycle and financial (and asset) market.
Malaysia’s structural current account surplus contributes to the overcapitalization of domestic firms. This in turn finances a financial (as opposed to an industrial), consumption-led (instead of investment-led) business cycle, where banking favors destabilizing asset price inflation. Islamic banks operating interdependently with conventional ones contribute to economic destabilization, channelling surplus funds from the corporate to the household sector.