COST OF CAPITAL AND INVESTMENT IN A NON-INTEREST ECONOMY

Abbas Mirakhor
Additional contact information
Abbas Mirakhor: Executive Director, International Monetary Fund

Islamic Economic Studies, 1996, vol. 04-1, 35-47

Abstract: It has been contended that Islamic banks and financial institutions continue to use the interest rate mechanism as a benchmark for procurement and placement of funds because in the absence of an interest rate mechanism there is no benchmark against which the cost of capital can be measured and the efficiency of investment projects evaluated. This paper proposes a method by which the cost of capital can be measured without resort to a fixed and predetermined interest rate. The suggested procedure is simple and is based on the well-known Tobin’s q and can be used in the private as well as in the public sector to obtain benchmark in reference to which investment decisions can be made.

Date: 1996
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.irti.org/English/Research/Documents/IES/133.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:isecst:0100

Access Statistics for this article

Islamic Economic Studies is currently edited by Salman Syed Ali and Anis Ben Khedher

More articles in Islamic Economic Studies from The Islamic Research and Training Institute (IRTI) Contact information at EDIRC.
Bibliographic data for series maintained by IRTI Staff () and ().