Fiscal and Monetary Policies from Islamic Economics Perspective

This paper summarizes main points in the existing Islamic economics literature on the subject of fiscal and monetary policies. It outlines institutional framework for these policies from the Islamic economics perspective. Some fresh points on the nature and role of government in the light of the Shari’ah principles, are also noted. The general goals for macroeconomic policies are discussed along with separate goals for each of the two policies. The argument is capped with a look at practical considerations in the actual working of both the policies. These are the main points in the paper. (1) Fiscal policy is the policy that works through government budget, and monetary policy is the policy aimed at monetary management. (2) Both the policies may complement each other because the goals for both of them are to be seen in the context of overall objectives at the state level. (3) Thrust of both policies would be different from that presently recognized, due to institutional factors. (4) Fi