Financial Instability and the Share Economy

Mohsen Fardmanesh and Shamim Siddiqui
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Mohsen Fardmanesh: Temple University
Shamim Siddiqui: University of Brunei Darussalam

Eastern Economic Journal, 1994, vol. 20, issue 1, 75-84

Abstract: This paper considers how a system of profit and loss sharing arrangements as an alternative to the interest system curbs financial instability and modifies banking and government's economic role. The profit-loss sharing system would result in a more stable level of investment and financial structure. It would increase lenders' scrutiny of borrowers' business undertakings, and would distribute the risk of investments between them. The entrepreneurs and the providers of funds would not be carried away by the market sentiment as easily. The profit-loss sharing ratio would replace the interest rate in monetary policy, and the debt-financing of the public outlays would be essentially eliminated.

JEL-codes: E44 (search for similar items in EconPapers)
Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:20:y:1994:i:1:p:75-84

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