الحوار العلمي الرابع عشر (14) للكلية: الحلقة الثانية


Zero Interest-Rate Policy and Islamic Financial Model Revisited

تكملة النقاش ستكون بحول الله يوم الأربعاء 21 فيفري 2018


Abstract
The ultimate goal of any central bank’s, CB, monetary policy is prices stability, an acceptable economic growth rate and better resource allocation by making money and credit available to the economy in sufficient quantities and at a reasonable cost. However, under zero interest rate, ZIR, environment and high deflation pressures, like the case of many advanced economies during the last two decades; it becomes vital to CBs to cope with this unprecedented situation in order to perform their functions properly; and therefore, have to implement some unconventional monetary policy, MP. Islamic financial model, IFM, on the other hand, is deemed to provide such a policy since it is originally based upon riba-free or interest-free financing policy; and consequently becomes an alternative financing model, especially when it is implemented for a considerable period of time. The primary purpose of this paper is to review the ZIR within both conventional and Islamic central banking, centering mainly on the specificities of the Islamic model. Of course, Islamic monetary policy is essentially distinguished from conventional one in that, unlike mainstream CBs, Islamic CBs are allowed to use only riba-free, equity-based monetary instruments, and Islamic commercial banks are obliged to carry out solely interest-free transactions. The most striking finding is that conventional CBs in several world leading economies are increasingly joining their Islamic counterparts in conducting their zero- or near-zero-interestrate
policies.

Keywords: monetary policy, central banking, zero interest rate, Islamic monetary policy, riba, riba-free
monetary instruments, riba-free central banking


							

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