The Effect of the Religious Tax of Zakat on Investment in an Islamic Economy
Zakah may increase or decrease the volume of aggregate savings depending on the consumption hypothesis which applies to the economy. Zakah is an opportunity cost of not investing available funds in the Islamic economy. Investment would continue to take place as long as the expected net profit exceeds the rate of zakah on idle assets. An Islamic firm will reach an equilibrium level of capital stock when the value of marginal product of capital becomes equal to the price of the unit of capital times its rate of depreciation minus the rate of zakah on idle assets. Zakah would result in a greater volume of investment in an Islamic economy than in a non-Islamic economy. Mathematical. For economists. Based on secondary sources. Documented.
The Role of the Stock Exchange in an Islamic Economy
In an ideal Islamic economy, the role of the stock exchange has been discussed. Introduces the concept of Maximum Share Price (MSP) and a kinked supply curve to argue that the fluctuations in share prices in an Islamic economy will be much less than in a non-Islamic economy. Draws curve diagrams. For economists.
The Role of the stock Exchange in an Islamic Economy
Monetary and Financial Theory and Institutions
Fiscal policy in an islamic state
The paper investigates the basic differences between fiscal policy in an Islamic economy and in non-Islamic economies. It shows that there are substantial differences in the role of fiscal policy, its objectives, its measures and its mechanism in the two types of economies. It determines the effects of Zakah on the consumption function and on the demand for investment in Islamic economies. The paper also explains how fiscal policy can be used to achieve equilibrium in the money market in Islamic economies where interest does not exist. Moreover, in this paper the author tries to demonstrate how to tackle problems of inflation and unemployment in Islamic economies by the manipulation of the “dues” on incomes and idle assets. Finally, the paper suggests a methodology for budgeting in Islamic economies to achieve economic stability. It is argued that the findings of this paper have policy implications for Islamic economies.
A behavioural model of an islamic firm
The study demonstrates that the objective function of a firm which operates in a society that follows Islamic laws as dictated by the teachings of the holy Our’an. the tradition of Prophet Muhammad (peace be upon him) and the practices of early Muslims, would be substantially different from that of firms operating in non-Islamic societies. The simple mathematical model developed to investigate the equilibrium of a single-product Islamic firm shows that the equilibrium level of output is one at which marginal cost equals marginal revenue, but that this level would be different from that obtained by a purely profit-maximising firm. It is likely that the Islamic firm achieves equilibrium at a higher level of output and price than would be obtained by a purely profit-maximising firm. The study also shows that the economic policies and market strategies of the Islamic firm must be carefully chosen so that they will not militate against the principles of Islam. A number of cases were listed to illustrate this important difference between an Islamic firm and non-Islamic firm.
A Behavioural Model of an Islamic Firm
A simple mathematical model of a Single-product Islamic firm which seeks to maximise utility, that isa function of the amount of profit and the amount of spending in charity or good deeds subject to the constraint that the amount of profit would, after payment of all taxes be no less than a minimum level. Concludes that the equilibrium level of output would be one at which marginal cost equals marginal revenue, but that this level would be different from that obtained by a purely profit-maximising firm. Mathematical. Meant for professional economists. Documented.