Dawood Yousofzai, Adela Rahmati
Abstract
The aim of this research is to examine monetary and fiscal policies
within Islamic economics, utilizing system dynamics to analyze the pathways
through which money supply, government revenues, and government expenditures
influence the economy. This method employs causal relationships to enhance the
understanding of how fiscal and monetary policies operate in an Islamic
economic framework. Findings in the area of monetary policy indicate that its
impact is mediated through variables such as investment, consumption, and
exchange rates. Furthermore, in Islamic economics, the government can utilize
fixed and variable profit rates instead of interest rates. In terms of fiscal
policy, results show that Islamic governments tend to face lower budget
deficits due to the existence of various revenue sources beyond taxation.
Additionally, through the application of fiscal policies in Islamic economics,
the government can also control inflation within society.
Keywords: Fiscal policy, Monetary policy,
Islamic economics, System dynamics, Vensim