Central Bank in Conventional Economics and Islamic Economics; Solutions for Improving Central Bank Performance in the Iran's Economy

Husain Samsami / Assistant Professor, Faculty of Economics and Political Science, Shahid Beheshti University h-samsami@sbu.ac.ir

Alireza Mohammadi / PhD in Economics, Edalat University                        alirezashakhes@gmail.com

Received: 2019/04/04 - Accepted: 2019/08/07

Abstract

One of the essentials for the realization of Islamic banking is founding the Central Bank based on Islamic values and principles. Using an analytical approach, and given the limited studies in the field of central banking in Islamic economics literature, this paper provides a favorable model of central banking in the Islamic banking system. According to the research hypothesis, the Central Bank in the Islamic economy has a different nature, structure, goals, tools and policies than the Central Bank in the conventional economy. Based on the research results, the proposed model of Islamic central banking presents a new structure of Islamic monetary and banking system. In this modern structure, banks do not have the power to create money (full reserves) and money creation is done only by the Islamic Central Bank. In this model, the institution of the bank returns to the true position of financial intermediation.

Keywords: central banking, Central Bank, Islamic Central Banking, full storage, conducting money and credit.

JEL: E5, E58, E59.