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Financial Instability and the Share Economy

Author

Listed:
  • Mohsen Fardmanesh

    (Temple University)

  • Shamim A. Siddiqui

    (University of Brunei Darussalam)

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.

Suggested Citation

  • Mohsen Fardmanesh & Shamim A. Siddiqui, 1994. "Financial Instability and the Share Economy," Eastern Economic Journal, Eastern Economic Association, vol. 20(1), pages 75-84, Winter.
    • Handle: RePEc:eej:eeconj:v:20:y:1994:i:1:p:75-84
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume20/V20N1P75_84.pdf
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    Citations

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    Cited by:

    1. Shamim A. Siddiqui, 2014. "Riba, time value of money and discounting," Chapters, in: M. Kabir Hassan & Mervyn K. Lewis (ed.), Handbook on Islam and Economic Life, chapter 6, pages iii-iii, Edward Elgar Publishing.
    2. ., 2014. "The case against interest: is it compelling?," Chapters, in: Morality and Justice in Islamic Economics and Finance, chapter 5, pages 137-162, Edward Elgar Publishing.
    3. Shamim Ahmad Siddiqui, 2008. "An Evaluation of Research on Monetary Policy and Stability of the Islamic Economic system تقييم الأبحاث المتعلقة بالسياسة والاستقرار المالي لنظام الاقتصاد الإسلامي," Papers and books based on the proceedings of the Conferences organized by the Islamic Economics Institute, KAAU. 51, King Abdulaziz University, Islamic Economics Institute..

    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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