Capital Market Equilibrium in the Islamic Economy

Authors

1 Assistant Professor of Tarbiyat Modares University

2 M. A. Student in Economics, University of Tarbiyat Modares University

Abstract

This paper by modeling the behavior of economic agents in an Islamic economy and
develop a general equilibrium model investigates the capital market equilibrium in
an Islamic Economy. Accordingly, have tried to determine the capital market
regulator variable, by determine the affecting factors on supply and demand of
capital in an economy without interest. According to result, in compared with an
economy with interest, that determined exogenous interest rates in the money market
is regulator for capital market, variable profit sharing ratio of families in the
productive partnership is earned as a capital market endogenous regulator variable in
an economy without interest. Also in this article, capital market equilibrium point,
maximum production point of producers is obtained, which means more investment
in an economy interest-free to the economy is with interest.

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