Endogenous Monetary Transmission by Meso-Economic Model

This paper is a continuation of the recent papers by (Choudhury, ACRN J Finance Risk Perspect, Special Issue Soc Sustain Finance 6:37–52, 2017), (Choudhury, ACRN J Finance Risk Perspect, Special Issue SocSustain Finance 4:63–80, 2015), and (Choudhury and Hoque, J Econ Coop Dev 39:143–162, 2017) on the topic of endogenous nature of money (Choudhury, Money in Islam, Routledge, London, England, 1997) and monetary transmission as micro-money in Islamic financial economics. These papers have projected an Islamic economic theory of endogenous money that pursue the financing of projects in the real economy by bringing such project-specific spending to attain several much wanted goals of economic stability and performance. Among these is the 100% circulation of bank-savings that banks otherwise hold back into the liquid form of spending. A 100% Reserve Requirement Monetary System is maintained in Islamic monetary transmission and circulation with appropriate methodology and policies. Consequently, debt reduces to zero; the market transformation by the diversification of projects, the portfolio diversification of financing instruments to mobilize monetary units as micro-money into projects, and the increase in stakeholding altogether make the real output level statistically elastic. Thereby, prices stabilize in the absence of all forms of interest rates. The end result is the generalized inter-causality among the endogenous inter-variable relations.