MONETARY POLICY IN AN ISLAMIC ECONOMICS

The primary aim of this paper is to elucidate the general concept of mone-tary policy under Islamic Economics. Not only does the stability of but alsothe growth of the economy in a country strongly depends upon monetary pol-icy implemented. Such the phenomenon also prevails in Islamic Economics inwhich the term is also ruled by the Holy Quran and the Hadith of the Prophet.Moreover, the Prophet issued some regulations regarding monetary, such asto adopt Dinars and Dirhams as the Islamic currencies. It is noted that, how-ever, the thing distinguishing between Islamic Economics and other economicsystems is concerning the variable of interest or usury, where either the HolyQuran or the Hadith clearly states that it is banned. Due to using interest as theyardstick, the conventional monetary instruments such as Open Market Oper-ation, Discount Rate and the likes are not considered as the monetary instru-ments under Islamic Economics. Therefore, Instead of interest, Islamic Eco-nomicsadopts ProβitLoss Sharing(PLS)system, regardedas theimportant partof monetary policy. Moreover, Islamic Economics has also its speciβic monetarystandard and instruments, which are far from interest or riba-based variables,such as musharakah certiβicates and others.