Front Matter Page
Monetary and Capital Markets Department
Contents
Abstract
I. Introduction
II. Macrofinancial Background and Monetary Policy Frameworks
III. Exploring the Monetary Transmission Mechanism
A. Overview of the Monetary Transmission Mechanism
The interest rate channel
The credit channel
The exchange rate channel
A sketch of the transmission mechanism
B. Relevance of the Bank Lending Channel for Islamic Banks
C. The Interest Rate Channel in the Presence of Islamic Banking
D. The Signaling Mechanism and the Profit-sharing Principle
IV. Adapting the Monetary Policy Framework
A. The Dual Monetary Policy Regime
B. Fixed Exchange Rate Regimes Considerations
C. Making Monetary Transmission Operational
V. Monetary Operations under Islamic Banking
A. Sterilization Policies
B. Monetary Policy Operational Framework
C. Lender of Last Resort
D. Interbank Markets
VI. Conclusion
Tables
1. Monetary Policy Frameworks and Exchange Rate Arrangements in Countries with Islamic Banks (as of 2014)
2. Sterilization under Islamic Banking: Key Considerations
Figures
1. Islamic Banking, Financial Development, and Monetary Policy
2. Islamic Banking, Current Account Balances, and Exchange Rate Regimes
3. The Monetary Transmission Mechanism
4. Credit Demand and Supply Following an Adverse Macroeconomic Shock—Conventional System
5. Monetary Transmission Mechanism in Dual Financial Systems
6. Domestic Credit to the Private Sector
7. Islamic Monetary Operations Infrastructure: Building Blocks
8. Central Banks Monetary Operations Compliance with the Shari’ah Requirements
Boxes
1. Monetary Transmission from Conventional to Islamic Financial Systems
Appendices
I. The Interbank Mudarabah
II. The Commodity Murabahah
III. Qard with Rahn
References
Glossary
| AREAER |
Annual Report on Exchange Arrangements and Exchange Restrictions |
| CA |
Current Account |
| CB |
Central Bank |
| FX |
Foreign Exchange |
| GCC |
Gulf Cooperation Council |
| GDP |
Gross Domestic Product |
| GFC |
Global Financial Crisis |
| GFSR |
Global Financial Stability Report |
| GIC |
Government Investment Certificates |
| HQLA |
High Quality Liquid Assets |
| IDB |
Islamic Development Bank |
| IF SB |
Islamic Financial Services Board |
| IIFM |
International Islamic Financial Market |
| IIFS |
Institutions offering Islamic Financial Services |
| IILM |
International Islamic Liquidity Management Corporation |
| IIMM |
Islamic Interbank Money Market |
| IMF |
International Monetary Fund |
| ISIMP |
Information System for Instruments of Monetary Policy |
| LOLR |
Lender of Last Resort |
| MII |
Mudarabah Interbank Investment |
| MoF |
Ministry of Finance |
| MTM |
Monetary Transmission Mechanism |
| OMO |
Open Market Operation |
| PLS |
Profit and Loss Sharing |
| PSIA |
Profit-sharing Investment Account |
| REPO |
Repurchase Agreement |
| RR |
Reserve Requirements |
| SF |
Standing Facility |
| SLOLR |
Shari’ah-compliant Lender of Last Resort |
| SME |
Small-and-Medium Enterprise |
| SPV |
Special Purpose Vehicle |
| U.A.E. |
United Arab Emirates |
| U.K. |
United Kingdom |
| U.S. |
United States of America |
| WDI |
World Development Indicators |
| WEO |
World Economic Outlook |