Interest-free monetary policy and its impact on inflation and unemployment rates
Joint Authors
Salim, Muhammad
Kabir Hasan, M.
Source
ISRA International Journal of Islamic Finance
Issue
Vol. 11, Issue 1 (30 Jun. 2019), pp.46-61, 16 p.
Publisher
International Shari'ah Research Academy for Islamic Finance
Publication Date
2019-06-30
Country of Publication
Malaysia
No. of Pages
16
Main Subjects
Financial and Accounting Sciences
Abstract EN
Purpose This paper aims to examine the effects of interest-free and interest-based monetary policy on inflation and unemployment rates for two groups of countries where in one group, interest-free monetary policy (IFMP) was pursued, while in the other group, interest-based monetary policy (IBMP) was followed.
Design/methodology/approach This study involves a sample of 23 developed countries divided into two groups.
The authors measure economic performance by misery index (MI), and MI is calculated as unemployment rate plus inflation rate.
A group of countries, where MI is lower, performs better compared to the other group where MI is relatively higher.
Findings The results reveal that in group of 12 countries where IFMP is adopted, the MI is lower and thus performs better compared to a group of countries where IBMP is pursued.
Research limitations/implications The findings of this study have profound implications for the policymakers and government leaders who look for a solution to maintain both low inflation and unemployment rates.
The findings in this study clearly portray that such ideal situations can only be achieved by pursuing IFMP.
No wonder the countries which have been historically pursuing IFMP such as Japan, Switzerland, Sweden, the Netherlands and Denmark have been able to contain both inflation and unemployment rates compared to their counterparts among the English-speaking countries.
Originality/value This is one of the most recent tests on the differences in economic performance between IFMP and IBMP.
These results have significant value for policymakers and central bankers who have been struggling to maintain lower MI for decades.
American Psychological Association (APA)
Salim, Muhammad& Kabir Hasan, M.. 2019. Interest-free monetary policy and its impact on inflation and unemployment rates. ISRA International Journal of Islamic Finance،Vol. 11, no. 1, pp.46-61.
https://search.emarefa.net/detail/BIM-965080
Modern Language Association (MLA)
Salim, Muhammad& Kabir Hasan, M.. Interest-free monetary policy and its impact on inflation and unemployment rates. ISRA International Journal of Islamic Finance Vol. 11, no. 1 (2019), pp.46-61.
https://search.emarefa.net/detail/BIM-965080
American Medical Association (AMA)
Salim, Muhammad& Kabir Hasan, M.. Interest-free monetary policy and its impact on inflation and unemployment rates. ISRA International Journal of Islamic Finance. 2019. Vol. 11, no. 1, pp.46-61.
https://search.emarefa.net/detail/BIM-965080
Data Type
Journal Articles
Language
English
Record ID
BIM-965080