Resource mobilization for government expenditures through Islamic modes of contract : the case of Iran

Abstract EN

The paper argues that in conventional economic system, fiscal and monetary policies are independent of each other, unintegrated and often conflicting.

As an example, he points to the "crowding-out-effect".

The crowding-out effect arises from the way money has been defined and through money market via the rate of interest.

This paper argues that in an Islamic economy financial (rather than monetary) and fiscal policies are not mutually exclusive.

In the absence of interest-based loan markets these two policies can not only co-exist, they also reinforce each other.

The paper attempts to demonstrate that the Iranian experience in using integrated financial and fiscal policies has been quite successful.

An Islamic state can use Islamic modes of contract to partially or even completely finance some public expenditures.