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A sharia return as an alternative instrument for monetary policy

Author

Listed:
  • Ashief Hamam

    (Pusat Studi Ekonomi dan Bisnis Islam)

Abstract

Rapid development in Islamic financial industry has not been supported by sharia monetary policy instruments. This study looks at the possibility of sharia returns as the instrument. Using both error correction model and vector error correction model to estimate the data from 2002(1) to 2010(12), this paper finds that sharia return has the same effect as the interest rate in the demand for money. The shock effect of sharia return on broad money supply, Gross Domestic Product, and Consumer Price Index is greater than that of interest rate. In addition, these three variables are more quickly become stable following the shock of sharia return.

Suggested Citation

  • Ashief Hamam, 2011. "A sharia return as an alternative instrument for monetary policy," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 3(1), pages 97-107, April.
    • Handle: RePEc:uii:journl:v:3:y:2011:i:1:p:97-107
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    References listed on IDEAS

    as
    1. Domowitz, Ian & Elbadawi, Ibrahim, 1987. "An error-correction approach to money demand : The case of Sudan," Journal of Development Economics, Elsevier, vol. 26(2), pages 257-275, August.
    2. Chapra, Muhammad Umer, 1996. "Monetary Management In An Islamic Economy," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 4, pages 2-35.
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    More about this item

    Keywords

    Sharia return; islamic financial system; vector error correction model;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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