Sonan Memon

Sonan Memon

My interests lie in monetary economics, network science and economic sociology.

Publications

Beyond Preference: Evaluating the Welfare Effects of Islamic Banking

Published in University of Oregon, 2026

This paper develops a partial equilibrium model of consumer choice between Islamic and conventional banks to analyze how banking composition affects aggregate consumer welfare. The model incorporates borrower heterogeneity, risk-sensitive preferences, and stochastic investment returns, and is evaluated using Monte Carlo simulations. The results show that while a significant share of consumers prefer Islamic banking, its contribution to aggregate consumer surplus is modest. Counterfactual analysis indicates that replacing an Islamic bank with a conventional bank moderately reduces consumer surplus when loan rates are held constant. These findings suggest that Islamic banking enhances welfare primarily through preference matching rather than large efficiency gains. However, the analysis is limited to a partial equilibrium framework and does not account for macroeconomic feedback effects. Extending the model to a general equilibrium setting with endogenous bank behavior and dynamic borrower relationships remains an important direction for future research.

Recommended citation: Memon, S. (2026). Beyond Preference: Evaluating the Welfare Effects of Islamic Banking. University of Oregon.
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The Desirability of Economic Inequality: A Discourse.

Published in PIDE Working Paper, 2023

I critically examine the burgeoning literature on inequality in economics. I report major empirical stylized facts on wealth/income inequality in the world and specifically in Pakistan. I also discuss arguments presented by many economists and some philosophers regarding the undesirability of wealth and income inequality and policies recommended to reduce inequality. I present several arguments in defense of economic inequality by establishing its role in creating incentives, economic growth, and urbanization. I also argue that many of the policies proposed for ejecting inequality from the society impede on individual and social freedoms. Moreover, there are theoretical and philosophical conundrums regarding how to share the pie of wealth and income which stifle attempts to redistribute. Lastly, I ask the why question by interrogating the relevance of inequality, making the case that absolute poverty, pain and suffering are the relevant curses which have to be excommunicated from an ideal society rather than the distribution of wealth and income.

Recommended citation: Memon, S. (2022). The Desirability of Economic Inequality: A Discourse. PIDE Working Paper.
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Inflation in Pakistan: High-Frequency Estimation and Forecasting

Published in PIDE Working Paper Series, 2022

I begin by motivating the utility of high-frequency inflation estimation and reviewing recent work done at the State Bank of Pakistan for inflation forecasting and now-casting GDP using machine learning (ML) tools. I also present stylised facts about the structure of historical and especially recent inflation trends in Pakistan. However, since the available data and already used methods cannot achieve high frequency forecasting, I discuss three novel techniques from recent literature, including web scrapping, scanner data and synthetic data. Due to a lack of access to Pakistan’s scanner and web-scrapped data, I generate synthetic data using generative ML models (Gaussian Copula and PAR models) and numerical analysis (cubic spline interpolation) methods. I use cubic splines to estimate the monthly inflation rate from quarterly data and unknown high frequency, weekly inflation rate from actual monthly data. Meanwhile, I use a probabilistic autoregressive ML model to forecast future short-run inflation for Pakistan from 2020 to 2023. I evaluate the accuracy of ML forecasts by comparing them with forecast error variances and predictions from conventional reduced form vector autoregressive models (VAR).

Recommended citation: Memon, S. (2022). Inflation in Pakistan: High-Frequency Estimation and Forecasting (No. 2022: 12). Pakistan Institute of Development Economics.
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Income inequality and macroeconomic instability

Published in Review of Development Economics, 2021

This paper examines the relationship between macroeconomic instability, as measured by the variance of inflation and output, and income inequality. We develop a panel data set consisting of 61 developed and developing economies for 1990–2019. Our results highlight a positive relationship between past inflation variance and subsequent inequality. We find that this relationship is nonexistent in developed countries but is strong for developing economies. Developing countries that have adopted an inflation targeting (IT) regime are insulated from the regressive effect of inflation volatility. From the point of view of achieving an even income distribution, IT may be consistent with better equity and efficiency outcomes simultaneously. The main findings are robust to a rich set of controls, alternative measures of volatility and inequality, various subsample checks, and dynamic panel specifications.

Recommended citation: Memon, S., & Qureshi, I. A. (2021). Income inequality and macroeconomic instability. Review of Development Economics, 25(2), 758-789.
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