IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/72898.html
   My bibliography  Save this paper

PLS finance and monetary policy: a new measure mooted

Author

Listed:
  • Hasan, Zubair

Abstract

Islam banishes interest. This raises two questions contextual to Central Banking. First, can Islamic banks create credit like the conventional? We shall argue that Islamic banks cannot avoid credit creation; an imperative for staying in the market where they operate in competition with their conventional rivals. Evidently, the interest rate policy would not be applicable to them as a control measure. This leads us to the second question: What could possibly replace the interest rate for Islamic banks? In reply, the paper suggests what it calls a leverage control rate (LCR) as an addition to Central Banks’ credit control arsenal. The proposed rate is derived from the sharing of profit ratio in Islamic banking.It is contended that the new measure has an edge over the old fashioned interest rate instrument which it can in fact replace with advantage. It can possibly be a common measure in a dual system.

Suggested Citation

  • Hasan, Zubair, 2016. "PLS finance and monetary policy: a new measure mooted," MPRA Paper 72898, University Library of Munich, Germany, revised Jul 2016.
  • Handle: RePEc:pra:mprapa:72898
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/72898/1/MPRA_paper_72898.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Hasan, Zubair, 2014. "Risk sharing versus risk transfer in Islamic finance: revised," MPRA Paper 62826, University Library of Munich, Germany, revised Mar 2015.
    2. Martin Čihák & Heiko Hesse, 2010. "Islamic Banks and Financial Stability: An Empirical Analysis," Journal of Financial Services Research, Springer;Western Finance Association, vol. 38(2), pages 95-113, December.
    3. Hasan, Zubair, 2014. "Risk-sharing versus risk-transfer in Islamic finance: An evaluation," MPRA Paper 58059, University Library of Munich, Germany.
    4. Hasan, Zubair, 2014. "Risk sharing versus risk transfer in islamic finance," MPRA Paper 62810, University Library of Munich, Germany, revised Mar 2015.
    5. Jemma Dridi & Maher Hasan, 2010. "The Effects of the Global Crisison Islamic and Conventional Banks; A Comparative Study," IMF Working Papers 10/201, International Monetary Fund.
    6. Hasan, Zubair, 2015. "Risk sharing versus risk transfer in Islamic Finance: A critical appraisal," MPRA Paper 65028, University Library of Munich, Germany, revised May 2015.
    7. Hasan, Zubair, 2015. "Risk sharing versus risk transfer in islamic finance," MPRA Paper 62847, University Library of Munich, Germany, revised Mar 2015.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ghassan, Hassan B. & Guendouz, Abdelkarim, 2018. "Panel Modeling of Z-score: Evidence from Islamic and Conventional Saudi Banks," MPRA Paper 95239, University Library of Munich, Germany, revised 05 Jan 2019.

    More about this item

    Keywords

    Central banking; Credit creation; Leverage ControlRate (LCR); Islamic banks; Profit sharing;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:72898. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.