Restrictions of the Islamic Financial System and Counterpart Financial Support for Xinjiang

Huang Helen Hui (), Wang Hui (), Wei Zexin (), Xia Jiawei () and Zhang Shunming ()
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Huang Helen Hui: Faculty of Business Administration, University of Regina, Regina, SK, S4S 0A2, Canada
Wang Hui: School of Economics and Management, Beijing Information Science and Technology University, Beijing100192, China
Wei Zexin: School of Economics and Management, Beijing Information Science and Technology University, Beijing100192, China
Xia Jiawei: School of Finance, Renmin University of China, Beijing100872, China
Zhang Shunming: School of Finance, Renmin University of China, Beijing100872, China

Journal of Systems Science and Information, 2021, vol. 9, issue 2, 105-130

Abstract: This paper builds a theoretical framework of two-period general equilibrium model to explore whether 1) the restrictions of the Islamic financial system (RIFS) limit economic development in Xinjiang and 2) counterpart financial support for Xinjiang (CFSX) promotes economic development and social stability. First, we introduce above mentioned restrictions caused by Islamic beliefs into a general equilibrium model and modify Islamic agents’ budget constraints to define the benchmark equilibrium. Comparing the benchmark equilibrium with the perfect equilibrium, in which these restrictions are removed, we discover the RIFS paradox that RIFS undermine the social welfare and income of Muslims. Second, the financial support is introduced into the pattern of benchmark equilibrium as an exogenous variable to model its impact and hence we define the CFSX equilibrium. A series of policy analyses implies that the CFSX strategy improves living standards and social welfare in Xinjiang.

Keywords: islamic religious beliefs; general equilibrium; benchmark equilibrium; perfect equilibrium; economic development (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:9:y:2021:i:2:p:105-130:n:4

DOI: 10.21078/JSSI-2021-105-26

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