Tag: Macroeconomics

Towards an Integrative Framework for Understanding Muslim Consumption Behaviour

Some of the Islamic principles and institutions can be integrated in the mainstream economics framework, especially in research studies where the objective is to understand and describe reality rather than persuasion and idealization.

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Some Observations on User Cost of Capital

Interest based financial system discourages investment in socially optimal profitable projects, but which are not favored because of relative cost comparison from the market interest rate. If sales do not increase, it may lead to business cycle fluctuations with unplanned increase in inventories. With increased pressure to service debt, the environmental degradation and human resource exploitation may become common and secondary concerns.

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Consumption Smoothing – An Islamic Economics Perspective

It is an empirical observation that people desire to have smooth consumption throughout their lifetimes. Lifecycle consumption hypothesis (LCH) and permanent income hypothesis (PIH) try to explain that in micro-founded framework. Both negate the Keynes assertion that average propensity to consume (APC) falls as income rises. Some micro-economic evidence is also broadly consistent with LCH and PIH, at least in advanced economies.

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Production Function in an Islamic Economic Framework

With higher levels of investment, circulation of wealth and competitive markets, innovation and quality enhancement will be the only means of sustaining the edge for firms in an Islamic economic framework. Hence, there will be more focus on innovation, customer satisfaction and hence speed of innovation and productivity is expected to increase. The supply side of innovation, which is the human capital, will also be incentivized through employment creation as a result of removing concentration and idleness of wealth.

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Development from Islamic Economics Perspective

In neoclassical growth theories, the emphasis is on increasing savings and technological progress which brings about increase in capital per worker and eventually output per worker. In ‘endogenous growth theory’ models, more sophisticated work has been done by determining the factors which affect the technology, human capital and savings. This article analyzes whether Islamic economic principles have the capacity to help build these elements for sustainable growth and development.

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Demystifying Economic Behavior: Islamic Perspective

History of economic man is fascinating. He has used the nature’s blessings to find and create new and innovative ways of maximizing utility. But, nonetheless, at all points in time, he does not feel satiated. He remains poor ‘relatively’ to the limitless desires and nature’s limitations. The dream of being ‘truly apart’ only remains a dream in everyone’s life. But, then, everyone achieves it one day. There is one place that everyone reaches where he is not accompanied by anyone. It’s his or her grave. Belief in life hereafter is the only thing that gives meaning to this world and life.

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