Abstract
The recent financial and debt crises have sparked debates on the fundamental stability of the modern conventional financial system and the effectiveness of macroeconomic policies—monetary or fiscal policy or a combination of both—that are employed to stabilize the affected economy. These policies utilize the interest rate-based financial system, in public sector financing and in monetary operation. The current interest-based financial system, whose intrinsic feature of risk transfer favors the financier, creates a decoupling of the financial and real sectors and emergence of “paper” economies. Several literatures have argued that high debts have negative impact on economic growth. Continued transfers of risk with interest rate-based debt instruments do not serve the collective welfare; hence, an alternative system needs to be considered.
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Othman, A., Mat Sari, N., Alhabshi, S., Mirakhor, A. (2017). Macroeconomic Policies and Risk Transfer. In: Macroeconomic Policy and Islamic Finance in Malaysia. Financial Institutions, Reforms, and Policies in Muslim Countries. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-137-53159-9_3
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DOI: https://doi.org/10.1057/978-1-137-53159-9_3
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