The recent turmoil and monetary policy in a dual financial system with Islamic perspective

Zubair Hasan Hasan

MPRA Paper from University Library of Munich, Germany

Abstract: The financial turmoil that the 2007 subprime debacle of the US set into motion has raised a welter of puzzling questions for the policy makers across the world. The position seems all the more confusing in the Muslim world where the fast expanding Islamic finance operates in competition with the conventional in a dual setting. The turmoil has led many to blaming the private lure for the colossal failure of financial institutions. In contrast, others counter argue to put public policy in the dock under the exalted banner of ‘regime uncertainty’. They blames the aggravation of the trouble on the uncalled for government intervention in financial markets. Interestingly, few draw attention to moral crimes committed on either side of the fence among the causative factors. This paper seeks to investigate if the monetary policies the Central Banks follow - now including the Basel capital adequacy norms as well - would suit or suffice Islamic banking institutions competing with the conventional in a dual financial framework? In this context, it questions the claim that risk-sharing is or can alone be the basis for Islamic finance.

Keywords: Keywords: Monetary policy; Dual financial system; Profit sharing ratio; Regime uncertainty (search for similar items in EconPapers)
JEL-codes: E3 E5 E51 E58 (search for similar items in EconPapers)
Date: 2014-07-07
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:57133

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