Effect of GDP on Electric Energy Consumption

Effect of GDP on Electric Energy Consumption A Regression Analysis of Energy Consumption with Cross-Country Data Abstract This paper reviews four existent studies and performs a cross-country multivariate regression analysis in order to determine the relationship among electric energy consumption, population, land area size, and economic growth as measured by GDP using data from authoritative sources. Results from the statistical tests confirm a positive correlation between the three regressors and the dependent variable. Introduction Energy is as much a part of us and our daily lives as is our very DNA. We need and use energy every single day even more than we may realize and it is available in an array of different forms. This analysis will focus on energy in its electrical form, where it is derived from the flow of electric charge caused by electrical attraction or repulsion between charged particles (Helmenstine, 2017). Since energy is such an essential part of life as we know it, it is not surprising that the topic has made headlines time and time again. The New York Times claims that, in a recent study, the United States was ranked eighth among twenty-three of the world’s top energy-consuming countries in efficiency, and that, according to Federal data, America loses as much as two-thirds of the power it generates through simple waste (Cavanagh, 2017). Understanding the impact of these statistics and deciding how to improve electric energy efficiency begins with interpreting the demand for and consumption of electric energy. This regression will seek to quantify the effects of a selection of variables on electric energy consumption, specifically examining Gross Domestic Product (GDP), national populations, and land area size across diversified countries around the world, and to serve as a reference and aid for policy makers in estimating marginal energy capacity needs in accordance with flu ctuations among these variables. I hypothesize that the coefficients on a country’s GDP, population, and land mass are positive when regressed against national, annual electric energy consumption. Review of Previous Literature There are a considerable number of studies that look at the effects of a nation’s production level as an economic component of its energy consumption. One pioneering study by Kraft and Kraft (1978) compiled annualized expenditure data for the time period between 1947 and 1974.   Using a bivariate Sims causality test, results presented a causal, unidirectional relationship from gross national product (GNP) to energy consumption for the United States. In order to adapt and distinguish my analysis from this 1978 study, I will focus on updated data from the time period between 2010 and 2015. Similarly, in order to improve general comprehensibility, I will regress gross domestic product (GDP), rather than GNP, on electric energy consumption. GNP is a logical and effective variable to use since it quantifies a country’s production values regardless of the geographic location of the production, but GDP is the more commonly utilized method for calculating a country’s e conomic standing and success in the world, so GDP is the particular measure we will use. Mohanty and Chaturvedi (2015) interpreted an extensive assortment of secondhand findings to determine whether electric energy consumption drives economic growth or vice versa. Mohanty and Chaturvedi reviewed forty-seven independent studies to compare the presence and direction of a causal relationship between economic growth and energy consumption. Twenty-six of the articles examined suggested the existence of a causal relationship from economic growth to energy consumption; thirty-two found energy consumption to have a causal relationship to economic growth. Eleven analyses found simultaneous causality between economic growth and energy consumption, and three found no relationship either way. After reviewing the empirical research, Mohanty and Chaturvedi then collected annualized data from India for the time period from 1970-1971 to 2011-2012 and applied the two-step Engle-Granger technique along with the Granger causality/Block exogeneity Wald test. Results suggested that electric energy consumption does in fact fuel economic growth in both the short run and the long run. However, this analysis revolves around Indian data, and the authors conclude that the lack of consensus on the relationship between energy consumption and economic growth is primarily a result of country-specific economic structures, methodology adopted, and varying period of study. In order to build upon this study, I will use a similar time frame, from 2010-2015, and I will include data from one hundred seventy countries to evaluate energy consumption amongst a diverse selection of industrial systems. Ameyaw et al (2007) argues that electricity performs an essential function in the economic development of most countries. The detailed analysis specifically explores the causality nexus, the estimation of elasticity of energy consumption on economic growth and vice versa, in response to its importance in formulating and implementing energy consumption policy and environmental policy. Ameyaw et al targeted the study around Ghana after discovering that the country has not been evident or represented in much of the existent research. Amassing time series data for Ghana between 1970 and 2014, the study implements the Cobb-Douglas growth model and conducts the Vector Error Correction model in order to strategically verify the error correction adjustment. Finally, similar to the test performed by Mohanty and Chaturvedi, Ameyaw et al exercised the Granger Causality test to determine the direction of causality between electric energy consumption and economic growth. The observed findings rev ealed the existence of a unidirectional, causal relationship running from GDP to energy consumption. As a means of expanding upon this analysis, I will, as mentioned previously, use cross-country data and more recent data from 2015. Pao et al (2014) performed the final analysis which we will examine in this study. Data for this investigation were collected from Brazil during the time period between 1980 and 2008. Similar to Mohanty and Chaturvedi and to Ameyaw et al, Pao et al applied the Granger Causality test to the dataset. The results revealed a unidirectional, short-run causality from energy consumption to economic growth along with a bidirectional, robust causality between the two variables. A co-integration test was also implemented, and the outcome was the indication of a long-run equilibrium relationship between variables with electric energy consumption seeming to be real GDP elastic, which suggests that energy consumption has a strong, positive influence on variations in GDP. In the acknowledgement of previous literature, Ameyaw et al found evidence to support bidirectional, unidirectional, and no causality. This inconsistency was attributed not only to differences in location and economic structure, but also to the methodologies used in each analysis. The policy and social impacts of each outcome were explained, beginning with unidirectional causality from economic growth to energy consumption, as this paper seeks to prove. Such an outcome may, according to Ameyaw et al, imply that the implementation of energy conservation policies may have little or no adverse effect on economic growth. On the other hand, if a unidirectional causality is found to run from energy consumption to economic growth, then it is possible that reducing energy consumption could lead to a recession in economic growth, and that increasing energy consumption might positively contribute to a country’s economic growth. In contrast, the presence of bidirectional causality between energy consumption and GDP is likely to mean that economic growth may demand more energy while greater energy consumption might encourage economic growth. Accordingly, energy conservation attempts may inadvertently stunt econo mic growth. Finally, a lack of causality in either direction would indicate a rise in GDP may not affect electric energy consumption, and that energy conservation policies may have no influence on economic growth. It is important to note that all of the data in this study were converted into natural logarithms prior to the empirical analysis so that this series can be interpreted in growth terms rather than raw values. Similar to this study, I will include policy recommendations in the conclusion according to the empirical results from my regression. Specification of the Model Following the empirical literature in energy economics, it is logical to form a multivariate regression model between electric energy consumption and economic growth as follows: ECt = ÃŽ ²0 + ÃŽ ²1Popt + ÃŽ ²2LAt + ÃŽ ²3GDPt + ut, where EC represents energy consumption, Pop is population size, LA represents the land area as determined by the physical size of a country, and GDP is real GDP. The error term, ut, is assumed to be independent and identically distributed (iid) with a mean of zero and a constant variance. GDP, for this experiment, has been calculated as follows: GDP = C + I + G + NE, where C is national consumption, I is representative of investment, G is government expenditure, and NE is net exports which is measured as total imports subtracted from total exports. In accordance with observed research, the estimator coefficient on GDPt is expected to be positive; I further hypothesize that the coefficients on Popt and LAt will also be positive, such that: H0: ÃŽ ²1 ≠¤ 0, ÃŽ ²2 ≠¤ 0, and ÃŽ ²3 ≠¤ 0 H1: ÃŽ ²1 > 0, ÃŽ ²2 > 0, and ÃŽ ²3 > 0 Data Description Data for this study has been collected for the time period between 2010 and 2015 across one hundred seventy countries around the world. The regression will be performed using the 2015 data for the following three independent variables: population, land area, and GDP. Population is a sensible variable since it is logical to hypothesize that an area with higher population will have a more complex economic and social infrastructure and consequently greater demand for electric energy. Land area is reasonably expected to have the same effect on electric energy consumption as population does, since a larger country likely has a greater population and so on. The final variable to be regressed is GDP since it is a rational measure of economic growth and success. More developed countries, a.k.a. those with higher GDP, commonly have more advanced infrastructures and more taxing industrial and agricultural systems; subsequently, greater demand for electric energy is inferential. Population and GDP data were compiled from the World Bank, a regularly updated, open-access center for international data and statistics. To enhance comprehensibility, GDP values have been adjusted for inflation to reflect current U.S. dollars (USD). Electric energy consumption data were drawn from the U.S. Energy Information Administration (EIA), a government funded organization dedicated to collecting and analyzing impartial, independent energy data. Information from the EIA’s public access website is trusted and used by legislators, policy makers, and statisticians around the world. Figure 1. Cross-country scatter plots of the energy consumption and real GDP, 2015 Figure 1 is a scatter plot showing the relationship between electric energy consumption (in billion Kilowatthours) and GDP (in real USD). Containing all one hundred seventy observations, a cluster in the bottom left corner is undeniable, given the exception of a few outliers. Figure 2 adjusts to show a clearer view of the majority of the data, excluding the top ten countries with the highest GDP. Figure 2. Zoomed in view of Figure 1 to exclude outliers Figure 3. Summary statistics for the year 2015   Figure 3 shows the descriptive statistics of each variable with the full one hundred seventy observations included. Results The following table, Figure 4, presents a summarization of the results from four separate regression tests performed on the dataset: As expected, the outcomes offer beta coefficients which estimate a positive correlation between each independent variable and the dependent variable. However, it is interesting to note that the intercept value is only statistically significant in the fourth regression, when all variables have been included. Simultaneously, the fourth regression possesses the highest R2 and adjusted R2, which proposes a reliable, positive relationship between the independent variables and electric energy consumption. Regardless of the insignificant intercept terms, each of the first three regressions is worth noting. In the first analysis, population alone is regressed against energy consumption. The coefficient on the population is positive and statistically significant at the 1% level. This indicates that countries with larger populations will, at least theoretically, have greater demand for electric energy. The magnitude of the coefficient estimator on population is minimal, such that a unitary increase in population will cause a subsequent increase in demand for electric energy by just 0.00000257; nevertheless, it is a positive influence, and that satisfies our originaly hypothesis. R2 and the adjusted R2 for this test are 0.56 and 0.55, respectively, indicating overall significance in explaining variance among the dependent variable. Land area is treated as the sole regressor in the second regression. Similar to the first regression, the coefficient on land area is positive and statistically significant at the 1% level. One key difference, however, is the value of the intercept term. The first regression shows a positive intercept, while the second has a negative one. The coefficient estimator value and magnitude are roughly the same though, with a value of 0.000232 and unsubstantial magnitude. R2 and the adjusted R2 are 0.48 and 0.47, respectively, signifying acceptable importance in explaining variance among the dependent variable. The final simple linear regression performed is the third test which considers GDP as the lone regressor. Again, like the previous two regressions, this test shows a positive coefficient on GDP that is statistically significant at the 1% level. The intercept value is positive, similar to the first regression and different from the second. The coefficient estimator is noticeably smaller in this regression, however, with a value of 0.000000000153. Such a low value suggests questionable magnitude and importance, especially when combined with the inferior R2 and adjusted R2 value of 0.43. The fourth and final regression completed is the test which regresses all three of our independent variables against energy consumption. This test is the only one which has a statistically significant intercept, but it is similar to the other regressions in that the coefficient on each independent variable is positive and significant at the 1% level. The values on the intercept, population term, land area term, and GDP term are as follows: -52.03, 0.00000136, 0.000129, and 0.0000000000498, respectively. The R2 and adjusted R2 share a value of 0.70, explaining an impressive percentage of variation among the dependent variable. Conclusion The analysis in this paper shows that GDP, population, and land area size all have a positive impact on energy consumption. These effects are statistically significant, even at the 1% level. My results match those of much of the existent literature, including Kraft and Kraft (1978), who use data from 1947 to 1974. This analysis confirms their findings using recent data, suggesting that experimental methodologies adopted by individual researchers may play a bigger role in variations among results than time periods do. The fact that there is such a lack of consensus among empirical results implies that policy makers should closely examine the techniques used to achieve the results they are given and thoroughly consider the differences in the economic structure of their country compared to countries included in studies. This is exactly what Ameyaw et al (2007) had in mind when they specified their test around Ghana’s data, improving applicability of the results to environmental and energy conservation policy makers in the country of Ghana. The conclusions above, however, are indeed subject to a number of limitations. First, it is unclear to what extent these results can be applied to any individual country. Looking at global policy decisions, it is arguable, based on my results, that energy conservation attempts would likely have no negative impact on economic growth and development. However, previous literature has proposed that the relationship between economic growth and energy consumption is likely to differ among diverse countries with unique economic structures and geographic conditions. Second, there may be a host of other variables that affect electric energy consumption, such as funding available for, technological advancement in, and national ability and willingness to adopt renewable energy sources as these sources may be more or less efficient and consequently alter our interpretation of the energy consumption data. Including such quantities in my regression would increase the precision of the estimations a nd simultaneously help to eliminate potential omitted variable bias. The ways in which economic growth impacts electric energy consumption are not necessarily clear. A rise in economic growth may be associated with an initial increase in CO2 emissions, which could worsen economic activity or encourage individuals to seek alternative energy sources. As a result, GDP would fall while renewable energy consumption would grow exponentially. Such investigations, however, are left for future research. Bibliography Ameyaw, B., Oppong, A., Abruquah, L. and Ashalley, E. (2017). Causality Nexus of Electricity Consumption and Economic Growth: An Empirical Evidence from Ghana. Open Journal of Business and Management, 05(01), pp.1-10. Cavanagh, T. (2017). Opinion | Why Is America Wasting So Much Energy?. [online] Nytimes.com. Available at: [Accessed 2 Dec. 2017]. Data.worldbank.org. (2017). GDP, PPP (current international $) | Data. [online] Available at: https://data.worldbank.org/indicator/NY.GDP.MKTP.PP.CD [Accessed 2 Dec. 2017]. Eia.gov. (2015). International Energy Statistics. [online] Available at: https://www.eia.gov/beta/international/data/browser/#/?pa=0000002c=ruvvvvvfvtvnvv1urvvvvfvvvvvvfvvvou20evvvvvvvvvnvvuvoct=0tl_id=2-Avs=INTL.2-2-AFG-BKWH.Avo=0v=Hend=2015 [Accessed 2 Dec. 2017]. Helmenstine, A. (2017). What Electrical Energy Is and How It Works. [online] ThoughtCo. Available at: https://www.thoughtco.com/electrical-energy-definition-and-examples-4119325 [Accessed 2 Dec. 2017]. Kraft, J. and Kraft, A. (1978) On the Relationship between Energy and GNP. Journal of Energy Development, 3, 401-403. Mohanty, A. and Chaturvedi, D. (2015). Relationship between Electricity Energy Consumption and GDP: Evidence from India. International Journal of Economics and Finance, 7(2), pp.186-202. Pao, H., Li, Y. and Fu, H. (2014). Causality Relationship between Energy Consumption and Economic Growth in Brazil. Smart Grid and Renewable Energy, 05(08), pp.198-205.

Eats, Shoots and Leaves

In Eats, Shoots & Leaves, Lynne Truss is a highly determined stickler or, perfectionist, when it comes to punctuation. In the novel, she argues that everyday punctuation marks, such as the apostrophe, are being misused and humiliated in front of thousands of people. They helplessly droop in between the wrong letters on hundreds of grocer signs, articles, and even in newspapers. Lynne Truss makes a clear point as she works her way through despair, anger, humor, and confidence just wishing that people can join together to stop the mistreatment of punctuation in Eats, Shoots & Leaves. In my opinion, people like Lynne Truss have such a beef with poor punctuation, grammatical slip-ups, and faulty usage because they are meant to see the world and its issues on behalf of other citizens who are unaware of their surroundings. These perfectionists’ infatuation is seeing grammar used in its proper form and look forward in perceiving a day where everybody will be concerned with a misspelled stop sign. I believe that our world is full of these totally unconscious errors because many people are incredibly stingy and set on doing only what they suppose will help them prosper or obtain wellbeing. This is not correct, for every human being on this planet should not only care about their status, but should also be concerned with the faults that exist somewhere near them. The role that writing plays in my life is exceptionally huge since it is happening all the time and roughly everyday. English is something that is used in all school subjects, professions, and businesses so proper language grammatically is vital to all individuals. Not only do we use it constantly, but is appears as well on the television, the internet, etc. therefore appropriate spelling and grammar is significantly important. Even though I give the impression of being a stickler, I, in fact, am a slacker. The use of the suitable English language is awfully essential for a young high school child like me, but it has never really been a strong quality that I contain. When I reach a statement that I cannot recognize, it seems like too much of an effort for me to find a dictionary and research only one word, just like millions of other people out there. Maintaining proper English is crucial thus I try to write with as much concern about punctuation and grammar as possible and hope only to improve on this in the future.

Ged Essay Writing Samples Secrets

Ged Essay Writing Samples Secrets Add ideas for examples you need to have in your essay. Practicing the elements of excellent essay writing is helpful regardless of what topic you concentrate on. Possessing good essay examples provides the reader an in-depth and on-the-court idea about what a well structured and coherent essay appears like. You're not given a choice about what sort of essay you will write. Some ideas to pick the ideal essay writing service In order to learn to analyze the information provided and make the correct decision whilst reading the very best essay writing service reviews, you want to understand how to pick the ged practice essay qyestions service which are going to be able to cover all of your academic writing needs. Any of the aforementioned questions can be utilized as a GED essay topic, and you need to be prepared to react to such prompts. Besides regular essay instructions, a sample response is supplied for review. A summary of the word evidence on ged essay. This portion of the story is really not particularly special. If you obey the particular example through, it's simpler for the reader to learn what you mean. Ged Essay Writing Samples Fundamentals Explained Sample GED Extended Response passages are all very much like the ones you will notice on your true exam prompt, so they work nicely for familiarizing yourself with the form of reading you wi ll have to do. It is possible to likewise do the essays offered in the very first section of each one of the tests in the Official Study Guide. Part II is a test to figure out how well it is possible to use written language to spell out your ideas. Organization Being familiar with the fundamental elements of the GED Extended Response essay structure will help you once you're writing under time restrictions. These questions will allow you to increase your Accuplacer test score. Despite the fact that you pay for homework, we provide those options at no cost. This content isn't endorsed or accepted by ACE or GED Testing Service. Understanding how to read, write and solve problems is essential if you're planning to take the GED. A seasoned professional will make an error-free assignment very quickly and can help you boost your grades. When it's tough to compose an essay in 45 minutes, begin by taking more time. You only have to put assignment for our writer team working with a distinctive form. You need to contact their scores, it into a well you're able to provide you're not endorsed or obtained. Questions will concentrate on specific regions of the exercise together with time constraints. Now it's your time to inform us whether you're content with the results. Stick to the fundamental rules of any. You begin by asking a question, which is a great way to get started. To begin with, you must realize that however much unpredictable the topic could be, practice still makes perfect sense. Have a look at each question carefully and take a small time to work out the topic and what type of answer is going to be expected. The only problem includes grammar problems like harmful rather than harm in the question at the start. Try to remember, you are going to want to support your primary idea with examples from the reading. At this time you could be thinking, Ughhh I need to read a lot of books to write on a huge project in this way. There are several things it is possible to write about! Very good examples can persuade your reader to realize your point of view whilst adding words to help you accomplish your 200-word limit. Don't forget that you're NOT writing your opinion on the subject. The most suitable selection of topic is vitally important. Actually, you may pick any topic which you find interesting. Otherwise, you are able to look around you and select an interesting social topic. Ged Essay Writing Samples - the Story On account of the increasing number of folks pursuing the GED, there's a demand for ideas on how to get ready for the test. Whenever you choose to ask us for skilled support, don't hesitate to get in touch with our support managers. More than being the end goal of an individual, gaining a GED certification has to be viewed as the launch of a nice and stable life. If you believe that you cannot cope with the task you'd better request expert assistance.

Interest free transactions of Banks Practice - Free Essay Example

Sample details Pages: 6 Words: 1843 Downloads: 3 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? An Islamic bank is a financial institution that conducts its operations base on Shariah principles. Islamic scholars commend trade-oriented banking in place of traditional interest-bearing credit oriented banking. The major vehicle of interest-free banking is a two-tier mudarabah, which is a business contract negotiated on the basis of profit-sharing ratios between two profits-seeking parties, A and B. Don’t waste time! Our writers will create an original "Interest free transactions of Banks Practice" essay for you Create order Parties A provide funds to party B, party B independently manages the business according to the agreed terms. From the banking point of view, it is an advance agreement on a ratio in which realized business profits are to be shared. The basis of two-tier mudarabah is one mudarabah between the surplus economic units (depositors) and financial institution in order to replace interest-bearing contracts between savers and banks; and another mudarabah between the financial institutions and the deficit economic units in order to replace interest-bearing contracts between banks and ultimate users of funds. So, banks can negotiate deposits and advances on the basis of profit-sharing ratios. In effect, interest-bearing loans are replaced by profit-seeking investments and qard hasanah (loans on zero interest). Interest-free financial institution can efficiently perform all types of intermediation after eliminating interest from the system and the replacement of interest rates by profit-shar ing ratios has profound macroeconomic consequences for unemployment, inflation, stability, growth, and income distribution. The Needs of Islamic Banks With Conventional Bank Many Islamic banks use the facilities of conventional banks for treasury management, foreign exchange, portfolio services and investment banking. Major multinational conventional banks have the critical mass to provide specialist service while Islamic banks are usually too small in size to take on such services themselves. Outsourcing makes sense for organizations when the benefits of internalization are outweighed by the administrative costs of trying to extend their functions into new areas where demand is limited. As most Islamic banks are located in the Muslim world, where most of the demand is for core banking services rather than for highly specialized finance, it is a potential management distraction to widen the facilities on offer excessively. This could actually result in deterioration in the quality of the basic level of deposit and funding services. Islamic Bank is Viable Islamic banking and finance are emerging as viable alternatives to conventional interest-based banking and financing. The long-term objective of BNM is to create an Islamic banking system operating on a parallel basis with the conventional banking system. However, similar to any banking system, an Islamic banking system requires three vital elements to qualify as a viable system, such as a large number of players, a broad variety of instruments and an Islamic money market. In addition, an Islamic banking system must also reflect the socio-economic values in Islam, and must be Islamic in both substance and form. Recognizing the above, BNM adopted a step-by-step approach to achieve the above objective. The first step to spread the virtues of Islamic banking was to disseminate Islamic banking on a nation-wide basis, with as many players as possible and to be able to reach all Malaysians. Islamic banking services using their existing infrastructure and branches. The option was seen as the most effective and efficient mode of increasing the number of institutions offering Islamic banking services at the lowest cost and within the shortest time frame. Following from the above, on 4 March 1993 BNM introduced a scheme known as Skim Perbankan Tanpa Faedah (Interest-free Banking Scheme) or SPTF in short. In terms of products and services, there are more than 40 Islamic financial products and services that may be offered by the banks using various Islamic concepts such as Mudharabah, Musyarakah, Murabahah, Bai Bithaman Ajil (Bai Muajjal), Ijarah, Wadiah Yad Dhamanah and Al-Ijarah Thumma al-Bai. Mudarabah (profit-sharing) Refers to an agreement made between a capital provider and another party (entrepreneur), to enable the entrepreneur to carry out business projects, based on a profit sharing basis, of a pre-agreed ratio. In the case of losses, the losses are borne by the provider of the funds. Musyarakah (joint venture) Refers to a partnership or joint venture for a specific business, whereby the distribution of profits will be apportioned according to an agreed ratio. In the event of losses, both parties will share the losses on the basis of their equity participation. Murabahah (cost plus) Refers to the sale of goods at a price, which includes a profit margin as agreed to by both parties. Such sales contract is valid on the condition that the price, other costs and the profit margin of the seller are stated at the time of the agreement of sale. Ijarah (leasing) Refers to an arrangement under which the lessor leases equipment, building or other facility to a client at an agreed rental against a fixed charge, as agreed by both parties. Islamic Banking vs. Conventional Banking There are two major difference between Islamic Banking and Conventional Banking which are conventional banking practices are concerned with elimination of risk where as Islamic banks bear the risk when involve in any transaction and when conventional banks involve in transaction with consumer they do not take the liability only get the benefit from consumer in form of interest whereas Islamic banks bear all the liability when involve in transaction with consumer. Getting out any benefit without bearing its liability is declared illegal in Islam. In retail deposit services include the provision of current accounts and low-risk investment accounts base on mudarabah with clients sharing in any bank profits. Conventional banks provide similar deposit services at retail level and allow overdrafts on current accounts, which often incur both fixed-rate charges and interest. Islamic banks cannot offer overdraft facilities on current accounts. However, depositors who get temporary financ ial difficulties due to events beyond their control such as illness may receive interest-free loans. Conventional banks offer savings rather than investment accounts, the major attraction of such accounts being the interest paid to depositors. This often increases as the minimum notice period for withdrawals lengthens, with accounts which for example require three months notice for withdrawals paying more interest than those requiring one months notice. Some Islamic banks apply similar stepped returns with their investment accounts, with a higher proportionate profit share as the period of notice for withdrawals increases. Moreover, conventional banks focus on money is a product besides medium of exchange and store of value and time value is the basis for charging interest on capital. Islamic banks concern with the real asset is a product but money is just a medium of exchange and profit on exchange of goods services are the basis for earning profit. In conventional banks, Gover nment very easily obtains loans from Central Bank through Money Market Operations without initiating capital development expenditure while Islamic banks, Government cannot obtain loans from the Monetary Agency without making sure the delivery of goods to National Investment fund. Lastly, debts financing in conventional banks gets the advantage of leverage for an enterprise, due to interest expense as deductible item form taxable profits. This causes huge burden of taxes on salaried persons. Thus the saving and disposable income of the people is affected badly. This results decrease in the real gross domestic product. In Islamic banks, sharing profits in case of Mudarabah and sharing in the organization of business venture in case of Musharakah, provides extra tax to Federal Government. This leads to minimize the tax burden over salaried persons. Due to which savings and disposable income of the people is increased, this results the increase in the real gross domestic product. List of Financial Institutions Offering Islamic Banking Services According to the General Council for Islamic Banks and Financial Institutions, there are currently 275 institutions worldwide that follow Islamic banking and financing principles, collectively managing in excess of $200 billion. These institutions are spread throughout 53 countries, including Europe and the United States. Twenty institutions now offer a variety of Islamic financial services in the United States. The Islamic banks are not the only financial institutions involved in Islamic banking. Other financial institutions also offer Islamic banking services through the Islamic Banking Scheme. In Malaysia, separate Islamic legislation and banking regulations exist side-by-side with those for the conventional banking system. The legal basis for the establishment of Islamic banks was the Islamic Banking Act (IBA) which came into effect on 7 April 1983. The IBA provides BNM with powers to supervise and regulate Islamic banks, similar to the case of other licensed banks. The firs t Islamic bank established in the country was Bank Islam Malaysia Berhad (BIMB) which commenced operations on 1 July 1983. In line with its objectives, the banking activities of the bank are based on Syariah principles. After more than a decade in operations, BIMB has proved to be a viable banking institution with its activity expanding rapidly throughout the country with a network of 80 branches and 1,200 employees. The bank was listed on the Main Board of the Kuala Lumpur Stock Exchange on 17 January 1992. After a careful consideration of various factors, BNM decided to allow the existing banking institutions to offer Islamic banking services using their existing infrastructure and branches. The option was seen as the most effective and efficient mode of increasing the number of institutions offering Islamic banking services at the lowest cost and within the shortest time frame. Following from the above, on 4 March 1993 BNM introduced a scheme known as Skim Perbankan Tanpa Faed ah(Interest-free Banking Scheme) or SPTF in short. To link the institutions and the instruments, the Islamic Interbank Money Market (IIMM) was introduced on 4 January 1994. As part of the effort to streamline and harmonize the Syariah interpretations among banks and takaful companies, BNM established the National Syariah Advisory Council on Islamic Banking and Takaful (NSAC) on 1 May 1997 as the highest Syariah authority on Islamic banking and takaful in Malaysia. On 1 October 1999, a second Islamic bank, namely Bank Muamalat Malaysia Berhad (BMMB) commenced operations. The establishment BMMB was the effect of the spin-off following the merger between Bank Bumiputra Malaysia Berhad (BBMB) and Bank of Commerce (Malaysia) Berhad (BOCB). Under the merger arrangement, the Islamic banking assets and liabilities of BBMB, BOCB and BBMB Kewangan Berhad (BBMBK) were transferred to BBMB, while the conventional operations of BBMB, BOCB and BBMBK were transferred to BOCB accordingly. In addi tion, BMMB was given 40 branches of BBMB and BBMBK in various locations throughout Malaysia and a staff workforce of 1,000, migrated from BBMB, BOCB and BBMBK. Islamic Banks 1. Bank Islam Malaysia Berhad 2. Bank Muamalat Malaysia Berhad Participating banks in the Islamic Banking Scheme Commercial Banks 1. AFFIN Bank Berhad 8. Malayan Banking Berhad 2. Alliance Bank Berhad 9. AmBank Berhad 3. OCBC Bank (Malaysia) Berhad 10. Public Bank Berhad 4. Citibank Berhad 11. RHB Bank Berhad 5. EON Bank Berhad 12. Southern Bank Berhad 6. Hong Leong Bank Berhad 13. HSBC Bank (M) Berhad 7. Standard Chartered Bank Malaysia Berhad Finance Companies 1. AFFIN-ACF Finance Berhad 5. Mayban Finance Berhad 2. AmFinance Berhad 6. Public Finance Berhad 3. EON Finance Berhad 7. Southern Finance Berhad 4. Hong Leong Finance Berhad Merchant Banks 1. AFFIN Merchant Bank Berhad 3. Alliance Merchant Berhad 2. Commerce International Merchant Bankers Berhad 4. AmMerchant Bank Berhad Discount Houses 1. Abrar Discounts Berhad 5. KAF Discounts Berhad 2. AFFIN Discount Berhad 6. Malaysia Discount Berhad 3. Amanah Short Deposits Berhad 7. Mayban Discount Berhad 4. CIMB Discount House Berhad