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Stabilization and Growth in an Open Islamic Economy

Author

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  • Mirakhor, Abbas
  • Zaidi, Iqbal

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, the paper investigates some open-economy implications of adopting Islamic banking for economic growth and stabilization. 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

  • Mirakhor, Abbas & Zaidi, Iqbal, 1988. "Stabilization and Growth in an Open Islamic Economy," MPRA Paper 56003, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:56003
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    File URL: https://mpra.ub.uni-muenchen.de/56003/1/MPRA_paper_56003.pdf
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    References listed on IDEAS

    as
    1. Mr. Abbas Mirakhor & Mr. Mohsin S. Khan, 1991. "Islamic Banking," IMF Working Papers 1991/088, International Monetary Fund.
    2. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    3. Miller, Marcus H, 1973. ""Competition and Credit Control" and the Open Economy," The Manchester School of Economic & Social Studies, University of Manchester, vol. 41(1), pages 123-140, March.
    4. William C. Brainard & James Tobin, 1968. "Pitfalls in Financial Model-Building," Cowles Foundation Discussion Papers 244, Cowles Foundation for Research in Economics, Yale University.
    5. William H. Branson, 1976. "The Dual Roles of the Government Budget and the Balance of Payments in the Movement from Short-Run to Long-Run Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(3), pages 345-367.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. Bruno Bonizzi, 2015. "Capital Market Inflation in Emerging Markets: the Cases of Brazil and South Korea," PSL Quarterly Review, Economia civile, vol. 68(273), pages 115-150.
    2. Mirakhor, Abbas, 2009. "Islamic Economics and Finance: An Institutional Perspective," MPRA Paper 56017, University Library of Munich, Germany.
    3. Hossein Askari & Noureddine Krichene & Abbas Mirakhor, 2014. "On the Stability of an Islamic Financial System," PSL Quarterly Review, Economia civile, vol. 67(269), pages 131-167.
    4. Abbas Mirakhor, 1993. "Equilibrium in a Non-Interest Open Economy التوازن في اقتصاد مفتوح خال من الربا," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 5(1), pages 3-23, January.
    5. Ali Soylu & Nazif Durmaz, 2013. "Profitability of Interest-Free versus Interest-Based Banks in Turkey," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 46(2), pages 176-188, June.
    6. Hasan, M. Aynul & Siddiqui, Ahmed Naeem, 1994. "Is Equity Financed Budget Deficit Stable In An Interest Free Economy?," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 1, pages 1-14.
    7. 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.
    8. Ghassan, Hassan B. & Al-Jefri, Essam H., 2015. "نموذج نظري إسلامي داخلي الزمن للحساب الجاري [Islamic Theoretical Intertemporal Model of the Current Account]," MPRA Paper 69963, University Library of Munich, Germany, revised 11 Jan 2016.
    9. Aliyu, Shehu Usman Rano, 2012. "Islamic banking and finance in Nigeria: issues, challenges and opportunities," MPRA Paper 42573, University Library of Munich, Germany, revised 05 Nov 2012.
    10. Andreas Jobst, 2007. "The Economics of Islamic Finance and Securitization," IMF Working Papers 2007/117, International Monetary Fund.
    11. Obiyathulla Ismath Bacha, Abbas Mirakhor, Hossein Askari, 2015. "Risk Sharing in Corporate and Public Finance: The Contribution of Islamic Finance," PSL Quarterly Review, Economia civile, vol. 68(274), pages 187-213.
    12. Mirakhor, Abbas & Krichene, Noureddine, 2009. "The Recent Crisis: Lessons for Islamic Finance," MPRA Paper 56022, University Library of Munich, Germany.
    13. Hasan, M. Aynul & Siddiqui, Ahmed Naeem, 1994. "Is Equity Financed Budget Deficit Stable In An Interest Free Economy?," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 1, pages 1-14.
    14. repec:ipg:wpaper:2014-093 is not listed on IDEAS
    15. Haque, Nadeem ul & Mirakhor, Abbas, 1999. "The Design of Instruments For Government Finance in An Islamic Economy," MPRA Paper 56028, University Library of Munich, Germany.

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    More about this item

    Keywords

    Islamic economics; general equilibrium model; monetary policy;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • P4 - Political Economy and Comparative Economic Systems - - Other Economic Systems

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