approach is to assume it to be constant for the whole sample period under consideration. this may be seen as a reasonable specification for a short time horizon, for which the structure of the economy can be assumed to be fairly constant. however, when analysing inflation dynamics over a longer period of time, the assumption of a constant mean is simply unreasonable. it could be replaced, for instance, by a mean process with break points, some exogenously given time trend, or some filtered process. i emphasise this point since it turns out that the measured persistence crucially depends on the specification of the mean inflation. 4 robalo marques ( 2004 ), for example, uses different specifications for the long - run inflation trend, such as linear trends for different subperiods, a moving average process, or a trend resulting from the hodrick - prescott filter. his findings are quite intuitive : there is a negative relationship between the assumed degree of flexibility of the mean process and the measured persistence. hence, assuming a constant mean, as is frequently done in the literature, generally tends to result in a very high estimated degree of inflation persistence. results from levin and piger ( 2004 ) confirm the importance of the assumptions about the long - run equilibrium level for the measurement of inflation persistence. in a study with twelve industrial countries they find that, when allowing for structural breaks in mean inflation, inflation persistence is not very pronounced. from that they draw the general conclusion that high inflation persistence is not an inherent characteristic of industrial economies. inflation persistence and monetary policy for monetary policy, the degree of inflation persistence is an important piece of information since it measures the dynamic impact of policy measures on the future path of inflation. a high degree of inflation persistence could make monetary policy much more difficult because monetary policy measures need a long time to affect the rate of inflation. the longer this transmission lag, the higher the probability of additional shocks hitting the rate which could render this policy measure ineffective or even inappropriate. the conduct of monetary policy becomes even more complicated if inflation persistence in a monetary union differs across member states. benigno and lopez - salido ( 2002 ) analyze the effect of different policy rules under such circumstances. based on a theoretical model, they find that a monetary policy that assigns a higher weight to countries with a higher degree of inflation persistence leads to better outcomes than targeting the area - wide rate of inflation. however, they also stress that such a see batini ( 2002 ). for estimating the degree of

understanding between the uk trade and investment and bank negara malaysia. the early development of islamic finance was very much domestic - centric. this recent decade has seen the internationalization of islamic finance. this has increased the potential for strategic partnerships between international financial centres that will bring with it mutually reinforcing benefits. malaysia has developed a comprehensive islamic finance industry founded on a strong legal and regulatory framework, with a diversified number of islamic banking and takaful institutions and a well - developed islamic money and capital market. today, islamic financial assets comprise 17 per cent of the total assets of the banking system in malaysia and the daily average volume transacted in our islamic money market is rm6 billion. the sukuk market which has been expanding at an average annual rate of 22 %, now accounts for more than 50 % of our bond market. with this financial infrastructure in place, malaysia has recently intensified its pace of liberalisation. in april, the government announced further liberalisation measures that included new licences to be offered in islamic banking and takaful. more specifically, up to two new mega islamic banking licences will be issued to foreign players with minimum paid up capital of usd1 billion to enhance global interlinkages and leverage on global developments in islamic finance. existing domestic islamic banks that wish to scale up their operations and expand into global markets are also given greater flexibility to enter into strategic partnerships with foreign players to raise their capitalization to usd1 billion with a higher foreign equity limit of up to 70 %. in addition, up to two new family takaful licences will be issued in 2009 to players that can offer significant value propositions to malaysia to spur the development of the takaful industry. takaful companies will also be given the flexibility to enter into strategic tie - ups with foreign partners through higher foreign equity limit of up to 70 %, to further strengthen resilience and competitiveness. in addition, international islamic financial institutions can be established to offer the full range of islamic financial services to residents and non - residents in international currencies. another further measure announced is the liberalization of legal profession to allow up to five top international law firms with expertise in international islamic finance to offer legal services in international islamic finance in malaysia. internationalisation of islamic finance several factors are important in sustaining the internationalisation of islamic finance. firstly, is the development of international islamic financial markets to enhance the liquidity of the instruments and the risk management capacity of the players. this is