Munich Personal RePEc Archive

The Design of Instruments For Government Finance in An Islamic Economy

Haque, Nadeem ul and Mirakhor, Abbas (1999): The Design of Instruments For Government Finance in An Islamic Economy. Published in: Islamic Economic Studies , Vol. 6, No. 2 (May 1999): pp. 27-43.

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Abstract

This paper attempts to present a viable approach for the design of an instrument of government finance (and monetary management) in an Islamic economy where conventional transactions based on an ex-ante promise of a risk-free rate of return are forbidden. Resources to finance government infrastructural and development projects can be mobilized through the issuance of a national participation paper (NPP) and this instrument can also serve as an instrument of monetary management. Various conceptional issues underpinning the introduction of such an instrument and methods of calculating a corresponding rate of return are discussed In principle, this approach has been accepted in Iran.

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