[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/67696.html
   My bibliography  Save this paper

Can GDP growth rate be used as a benchmark instrument for Islamic monetary policy?

Author

Listed:
  • Uddin, Md Akther
Abstract
This paper discusses Islamic monetary policy which could potentially be a sustainable alternative to the conventional. Islamic banks and financial institutions have to set their benchmark based on London Interbank Offered Rate (LIBOR) which raises doubt and controversy of the uniqueness of Islamic finance. By analyzing current literature on Islamic monetary policy models it is proposed in this study that GDP growth rate adjusted for interest income and inflation can be set as a benchmark for money market instrument and reference rate for financial and capital market to set the cost of capital or rate of return. In order to test the two proposed models, one year data from 99 countries have been collected. The study uses the OLS regression and the result shows that real interest rate is not a viable instrument for monetary policy framework as no significant relationship has been found with key factors such as inflation and unemployment. On the other hand, GDP growth rate has a statistically significant relationship with inflation and unemployment, GDP growth rate is higher for OIC countries, however, unemployment rate is higher.

Suggested Citation

  • Uddin, Md Akther, 2014. "Can GDP growth rate be used as a benchmark instrument for Islamic monetary policy?," MPRA Paper 67696, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:67696
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/67696/1/MPRA_paper_67696.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hamid Zangeneh & Ahmad Salam, 1993. "Central Banking in an Interest-Free Banking System المصارف المركزية في نظام مصرفي خال من الربا," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 5(1), pages 25-36, January.
    2. Shaikh, Salman, 2009. "Role of Central Bank in Islamic Finance," MPRA Paper 26702, University Library of Munich, Germany.
    3. Mohsin S. Khan & Abbas Mirakhor, 2009. "Monetary Management in an Islamic Economy الإدارة النقدية في اقتصاد إسلامي," Chapters of books published by the Islamic Economics Institute, KAAU or its faculty members., in: Islamic Economics Institute (ed.),Issues in the International Financial Crisis from an Islamic Perspective-05 قضايا في الأزمة المالية الدولية من منظور إسلامي, edition 1, chapter 12, pages 209-232, King Abdulaziz University, Islamic Economics Institute..
    4. Choudhry, Nurun N. & Mirakhor, Abbas, 1997. "Indirect Instruments Of Monetary Control In An Islamic Financial System," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 4, pages 28-65.
    5. Chapra, Muhammad Umer, 1996. "Monetary Management In An Islamic Economy," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 4, pages 2-35.
    6. Hanif, M. Nadim & Sheikh, Salman, 2009. "Central banking and monetary management in islamic financial environment," MPRA Paper 22907, University Library of Munich, Germany, revised 25 May 2010.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Uddin, Md Akther & Halim, Asyraf, 2015. "Islamic monetary policy: Is there an alternative of interest rate?," MPRA Paper 67697, University Library of Munich, Germany, revised 07 Jun 2015.
    2. Uddin, Md Akther & Ali, Md Hakim & Radwan, Maha, 2019. "Can GDP Growth Linked Instrument Be Used For Islamic Monetary Policy?," MPRA Paper 102888, University Library of Munich, Germany.
    3. Uddin, Md Akther, 2016. "Reemergence of Islamic Monetary Economics: A Review of Theory and Practice," MPRA Paper 72081, University Library of Munich, Germany.
    4. Uddin, Md Akther, 2019. "Islamic Monetary Economics: Insights from the Literature," MPRA Paper 102887, University Library of Munich, Germany.
    5. ALJARHI, Mabid, 2018. "The Islamic macroeconomic model: How to Apply it," MPRA Paper 103397, University Library of Munich, Germany, revised 01 Oct 2020.
    6. Hossain, Akhand Akhtar, 2014. "Empirical relationships among money, output and consumer prices in nine Muslim-majority countries," Journal of Asian Economics, Elsevier, vol. 31, pages 42-56.
    7. E. H. Ergeç & B. G. Arslan, 2013. "Impact of interest rates on Islamic and conventional banks: the case of Turkey," Applied Economics, Taylor & Francis Journals, vol. 45(17), pages 2381-2388, June.
    8. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    9. Martin Čihák & Heiko Hesse, 2010. "Islamic Banks and Financial Stability: An Empirical Analysis," Journal of Financial Services Research, Springer;Western Finance Association, vol. 38(2), pages 95-113, December.
    10. Shaukat, Mughees & Mirakhor, Abbas & Krichene, Noureddine, 2013. "Fragility Of Interest-Based Debt Financing: Is It Worth Sustaining A Regime Uncertainty?," MPRA Paper 56362, University Library of Munich, Germany.
    11. Mr. Alexei P Kireyev, 2001. "Financial Reforms in Sudan: Streamlining Bank Intermediation," IMF Working Papers 2001/053, International Monetary Fund.
    12. Amine Ben Amar, 2022. "On the role of Islamic banks in the monetary policy transmission in Saudi Arabia," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 12(1), pages 55-94, March.
    13. Saba Mushtaq & Danish Ahmed Siddiqui, 2016. "Effect of interest rate on economic performance: evidence from Islamic and non-Islamic economies," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 2(1), pages 1-14, December.
    14. repec:idn:jimfjn:v:3:y:2018:i:specialissued:p:1-16 is not listed on IDEAS
    15. Al-Jarhi, Mabid, 2000. "السياسات النقدية في إطار إسلامي [Monetary Policy in an Islamic Framework]," MPRA Paper 67547, University Library of Munich, Germany, revised 2002.
    16. Mirakhor, Abbas, 2012. "Islamic Finance, Risk Sharing and Macroeconomic Policies," MPRA Paper 56338, University Library of Munich, Germany.
    17. Abderraouf Ben Ahmed Mtiraoui, 2019. "Finance of Islamic Ethics, Conventional Finance and Economic Growth: Applying Dynamic Panel Data [Finance de l'éthique islamique, finance conventionnelle et croissance économique: Application de do," Post-Print hal-02495603, HAL.
    18. Rabiu Abubakar Abba & Besar Bin Ngah, 2020. "The Potentials of Islamic Banking on Poverty Alleviation in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 4(8), pages 438-443, August.
    19. Hassan, M. Kabir & Aliyu, Sirajo, 2018. "A contemporary survey of islamic banking literature," Journal of Financial Stability, Elsevier, vol. 34(C), pages 12-43.
    20. Jean Yves MOISSERON & Bruno Laurent MOSCHETTO & Frédéric TEULON, 2014. "Islamic finance: a review of the literature," Working Papers 2014-93, Department of Research, Ipag Business School.
    21. 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.

    More about this item

    Keywords

    Monetary Policy; Islamic Monetary Policy; Real Interest Rate; GDP Growth Rate; Inflation; Real Exchange Rate; Gross Savings;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:67696. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.