An Islamic econometric model for Malaysia with policy conclusions

A macroeconomic model for Malaysia for the period 1970-1985 has been developed. It estimates the effects of economic indicators on the product market, the labor market, and the financial sector. Also considered are the effects these indicators have on the consumption and investment functions of the Malaysian economy. The model can subsequently be restructured using critical Islamic macro-indicators, such as zaka expenditure and profit, an indicator that replaces interest. The macroeconomic results can be estimated using statistical interpretations within a Keynesian econometric framework. They can then be applied to a study of the Malaysian Fifth Development Plan. Particularly, one can critically evaluate the Malaysian New Economic Plan using the Islamic principles of distributive justice and economic efficiency as criteria.