Central Banking and Monetary Policy in Muslim-Majority Countries
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Central Banking and Monetary Policy in Muslim-Majority Countries

Akhand Akhtar Hossain

This book reviews key aspects of central banking and monetary policy in selected Muslim-majority countries. While reviewing country-specific experiences and issues in inflation and monetary policy, and analysing them from an historical context, emphasis is given to the evolution of Islamic banking and finance and the consequent institutional developments for maintaining price stability. One recurring theme is that, although Islamic banking and finance may have created some complexities, it remains consistent with Classical monetary theory and has created opportunities for improving the infrastructure of central banks and monetary policy to maintain both price and economic stability. The introduction of Islamic banking and finance strengthens the argument for low and stable inflation and rule-based monetary policy. Monetary policy frameworks in these countries include exchange-rate pegging, monetary targeting and inflation targeting under varied restrictions on capital flows. Macroeconomic problems under these regimes are also highlighted and their policy implications drawn.
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Chapter 6: Iran

Akhand Akhtar Hossain


Iran is one of the major Muslim-majority countries and the home of some of the greatest and most technically and culturally progressive of the ancient civilizations. Emerging about 1400 years ago with the advent of Islam, Persian-Turkic art, literature, philosophy, jurisprudence, architecture, medicine, astronomy and mathematics are now considered the finest achievements of the Persian-Islamic golden age and civilization. The immediately pre-Islamic Persian culture of the Sassanid era (c.1790 to 1400 years ago), in particular, influenced the Chinese, Indian and Roman civilizations. Historically, then, Iran has always occupied a prominent place in the Muslim world and continues to play an influential role in contemporary social, economic and political developments. Iran is an oil-exporting, middle-income country with a relatively youthful population about 80 million strong, over half of whom are below 30 years of age. It is a resource-rich country and has high growth potential, depending on how it uses its natural resources under an outward-oriented development strategy. As a result of major economic and political upheavals throughout the late 1970s and 1980s, Iran is going through an economic and social transition with the goal of establishing an outward-oriented Islamic society and economy. The next section of this chapter overviews Iran’s most recent period of economic and political history, spanning the past four decades. It then reviews the evolution of the exchange rate and monetary policy in Iran in an historical context.

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