Degree
Master of Science in Islamic Banking & Finance
Department
Department of Finance
Faculty/ School
School of Business Studies (SBS)
Date of Submission
Spring 2024
Supervisor
Dr. Adnan Haider, Professor of Business Economic and Analytics -SBS, Department of Finance
Keywords
Instruments of Islamic Monetary Policy, Central Banks, Policy Rate, Open Market Operations, Cash Reserve Requirement, Statuary Liquidity Reserve
Abstract
This study looks at the usage and features of Islamic monetary policy tools in ten Islamic countries. The research explores the framework for Shariah compliant monetary instrument and types of Islamic monetary policy tools adopted by these countries, as well as differences in their implementation, using data from central bank websites, monetary policy reports & legislation of central banks. The finding shows that no country among the 10 Countries have a comprehensive framework for managing Islamic monetary policy. However, majority of Islamic reviewed countries have some Islamic alternatives instrument to facilitate the monetary management of Islamic banking. The research delves deeper into the situation of Pakistan, comparing its Islamic monetary policy tools to those utilized in other countries. The study reveals that the State Bank of Pakistan using “standing facilities”, “Open Market Operations” and “Reserve requirements” to implementing the conventional monetary policy. Standing facilities are used to keep policy rates within the interest rate corridor and open market operation to manage the liquidity in the interbank market & Reserve requirement to reduce or increase the money supply. To enhance the Shariah compliant monetary instruments, the State Bank of Pakistan has recently implemented two new tools: “Shariah Compliant Standing Ceiling Facility - Mudaraba Based Standing Ceiling Facility” (MMF): An alternative to Standing Facility Injection & “Shariah Compliant Mudarabah Based Open Market Operations – Injections” (OMO-Injection): This serves as an alternative to Open Market Operations (Injection). This study aims to deepen the comprehension of Islamic monetary policy tools and lay the groundwork for future research on their effectiveness and impact.
Document Type
Restricted Access
Submission Type
Research Project
Recommended Citation
Ullah, Z. (2024). Islamic Monetary Policy Framework (Unpublished graduate research project). Institute of Business Administration, Pakistan. Retrieved from https://ir.iba.edu.pk/etd-ms-ibf/42
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