The Islamic macroeconomic model: How to Apply it

ALJARHI, Mabid (2018): The Islamic macroeconomic model: How to Apply it. Forthcoming in: Islamic Monetary Economics, Edited by Taha Eğri and Zeyneb Hafsa Orhan No. Published by Routledge, 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN (December 2021): pp. 28-55.

Abstract

Islamic macro models are two categories. The first was inspired by Mannan (1970), Siddiqui (1981, 2006) and Chapra (1985, 1996). It is elaborated by Khan and Mirakhor (1994), Iqbal and Mirakhor (2011), in addition to Mirakhor and Zaidi (2007). It uses a pure equity-based system, keeping the concept of a stable equilibrium, to draw conclusions about efficiency, equilibrium and stability. It ignores the institutional details of the monetary and financial structure. The second proposes an institutional structure of the monetary of financial sector of an Islamic economic system, with distinctive features of money creation and finance allocation, with the necessary instruments for the anchor and conduct of monetary policy. Shari'ah behavioral rules have been translated into an institutional structure. It uses an updated Al-Jarhi (1981, 1983) with several consequent modifications and improvements to do away with the neoclassical IS-LM, and prepare to switch to a more realistic disequilibrium structure . Based on Al-Jarhi’s updated and modified model, is proposed for economic development and stabilization. Implementation highlights gradualism and institutional competition as driving forces. The legal and regulatory environment is modified to provide both conventional and Islamic institutions working side-by-side to have an equal opportunity, leaving competition to have the final say.

• Item Type: MPRA Paper
• Language: English
• Keywords: Islamic economics, Islamic finance, Islamic macroeconomics, monetary policy, fiscal policy, development policy, policy anchor, interest rate, lending based, debt money, investment based, investment money.
• Subjects: E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E19 - Other; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems ; Standards ; Regimes ; Government and the Monetary System ; Payment Systems; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E61 - Policy Objectives ; Policy Designs and Consistency ; Policy Coordination; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy ; Stabilization ; Treasury Policy; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z12 - Religion

References

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