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Stabilization and Growth in an Open Islamic Economy

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  • International Monetary Fund

Abstract

Islam proposes the replacement of an interest-based financial system with one which operates on the basis of risk and profit sharing. Using a general equilibrium model, this paper investigates some open-economy implications of the adoption of Islamic banking for growth and stabilization of the economy. It analyzes the long-run effects of Islamic banking on international capital flows and on the economy’s capacity to adjust to disturbances. It concludes that monetary policy can be used effectively for stabilization purposes and that disturbances to asset positions are absorbed efficiently in an Islamic financial system.

Suggested Citation

  • International Monetary Fund, 1988. "Stabilization and Growth in an Open Islamic Economy," IMF Working Papers 1988/022, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1988/022
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    Cited by:

    1. Ms. Faezeh Raei & Mr. Selim Cakir, 2007. "Sukuk vs. Eurobonds: Is There a Difference in Value-at-Risk?," IMF Working Papers 2007/237, International Monetary Fund.
    2. Hernandez, Ariel, 2021. "SDG-aligned futures and the governance of the transformation to sustainability reconsidering governance perspectives on the futures we aspire to," IDOS Discussion Papers 30/2021, German Institute of Development and Sustainability (IDOS).
    3. Andreas Jobst, 2007. "The Economics of Islamic Finance and Securitization," IMF Working Papers 2007/117, International Monetary Fund.

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