Many prominent experts and scholars claim we are going to face both the supply and demand shock due to COVID-19 pandemic. However, since the first effect of the ongoing crisis the collateral damage (of financial assets) is, the question above seems appropriate. What do You think?
Monetarism led by Milton Friedman and Anna Schwartz tell that expansionary monetary policy is better during crisis. But Keynesian economist told that policy mix of fiscal and monetary policy can provide solution during crisis. In fact, it is reality. Another option is Islamic financial system that is Assets backed. It is proof during financial crisis of 2007-2010. You may Check the writing of Dr.Kabir Hasa.
I think the Islamic Economic Theory is suitable for every situation.
Islamic Economic Theory is the best theory, that suitable for any circumstances.
i would like to go with New-Keynesian which assumes that price resistance(stickiness) of market price in the short-term or markets do not work perfectly because of a lack of information, Such distortions prevent markets from immediately jumping to an equilibrium given by fundamentals. The scenario we envisage now. Also the New Consensus Model which followed from the New Keynesian.
Islamic economic theory with roots from the Holy Quran housing 2 key parts riba", & zakat. Theory goes under social economics and laws of governance under Islam conducive to Islamic societies with exceptions. However many phenomenons of present day economic development may not yet be answered there.
In my opinion, the Islamic Economic Theory is the best theory in the world for any situation.
The above question was asked in April 2020. At that time, the world was affected by the 1st wave of the SARS-CoV-2 (Covid-19) coronavirus pandemic. It was the moment after the first interest rate cuts applied in March and / or April 2020 as an anti-crisis preventive measure. Later some central banks cut interest rates to record lows again. In addition, some central banks in countries with their own currency participate in the process of direct purchase of treasury bonds in order to maintain liquidity in the state finance system and to generate additional anti-crisis money, which is used as part of public financial aid addressed to enterprises, companies and other economic entities. In addition, some central banks, similarly to the global financial crisis of 2008, purchase non-performing and junk assets with the highest level of credit risk, including lost loans and worthless securities from commercial banks in order to maintain liquidity in the commercial financial system. Therefore, the current monetary policies are ultra-lenient, ultra-liberal and aimed at increasing the liquidity and the amount of money in the economy. The result may be an increase in inflation, the allocation of financial surpluses in higher risk financial instruments operating on the capital markets, a decline in the exchange rate of domestic money against international currencies and other currencies, a reduction in the costs of servicing public debt, etc. the soft monetary policy mobilizes commercial banks to improve credit risk management processes and whether it activates entrepreneurship and innovation of economic entities operating in various industries and sectors covered by the financial anti-crisis state aid.
Regards,
Dariusz Prokopowicz
- Badges
- Science topic
- Similar topics
- Social Psychology
- Attitude