A deterioration in terms of trade then means that the price of cars falls relative to the price of wine in a common currency. In  2  BIS Review 75/2001  order to be able to sell more cars with a view to buying an unchanged quantity of wine and thereby leave the balance on current account unchanged, the country’s real exchange rate has to depreciate. Productivity growth. Suppose instead that the country becomes more efficient at manufacturing cars. This can lead to better quality cars for a given input of resources and a given price in the domestic currency. The cars can then command a higher price in the world market and the real exchange rate can appreciate. In practice, high productivity growth tends to be associated with a higher potential GDP growth rate. In a country where growth is higher than in the rest of the world, the real exchange rate can therefore be expected to show an appreciating trend. However, the relationship between productivity growth and the exchange rate is not stable. Economic theory is not clear cut on this point some lines of reasoning could lead to the opposite conclusion. An additional factor that is closely related to the real exchange rate is the balance on current account. A succession of current-account deficits leads to growing external debt and rising interest payments. The real exchange rate must then depreciate if the country is to achieve enough additional exports to finance the interest payments.
The growth in the sukuk market also reflects the commitment and combined efforts of the Malaysian government and regulators. There is a clear articulation of the vision and policies to drive the local Islamic capital market. This is reinforced by the implementation of a strong legal, regulatory and tax framework. Bank Negara Malaysia and the Securities Commission have worked closely on a sequence of vital blueprints: the 10-year Financial Sector Master Plan, the 10-year Capital Market Master Plan and the Islamic securities guidelines. The government has reaffirmed all these plans and initiatives with the announcement of a range of tax measures in the 2006 budget. Another important aspect of the development of the sukuk market is the development of the other key components of the Islamic financial system, the money market, banking, and takaful sectors. The various components are able to meet the different requirements of the economy including the differentiated tenor for which the funds are required. This includes providing stable long-term funds for large investments and development projects. These would allow for a balanced allocation of financial and economic resources within the economy, diversifying the risks through the Islamic financial system, and enhancing its flexibilities to adjust, thus strengthening its resilience. As Malaysia moves to a more liberalised and globalised Islamic capital market, the role of the industry in advancing the Islamic financial system becomes increasingly important. The role of the industry has been important in spearheading product innovation, branding, profiling, promotion and marketing of the Islamic capital market products and services.