Research Institute of Hawzah and University "Hawzah wa Dāneshgāh Research Institute" Journal of Economic Essays: an Islamic Approach 3115-8226 19 38 2022 09 23 A Comparative Analysis of Effects of Borrowing from Central Bank, Bonds, and Islamic Treasury Bills to Finance Government Budget Deficit on Selected A Comparative Analysis of Effects of Borrowing from Central Bank, Bonds, and Islamic Treasury Bills to Finance Government Budget Deficit on Selected 203 237 2091 10.30471/iee.2023.8891.2269 FA Davoud Rashidi PhD candidate in Economics ,university of Isfahan Mohammad Vaez Barzani Faculty member, University of Isfahan 0000-0001-6351-2060 Rasoul Bakhshi Associate Professor of Economics, University of Isfahan Journal Article 2022 09 12 The Iranian government has traditionally financed its budget deficit through borrowing from the Central Bank. In contrast, many countries rely on bonds as the primary method to finance the budget deficit. The Iranian economy rejects this method based on religious considerations. Islamic Economists in Iran have proposed an alternative financial instrument called the Islamic Treasury Bills, which inherently differ from bonds. This study analyzes and compares how borrowing from the Central Bank, bonds, and Islamic Treasury Bills as budget financing methods affect macroeconomic variables, such as inflation, investment, and gross domestic product. This study uses a Dynamic stochastic general equilibrium model (DSGE) for an open economy by considering various methods of financing budget deficit. Findings suggest that using Islamic Treasury Bills to finance the government's budget deficit is preferable to the two other approaches, i.e., borrowing from the Central Bank and issuing bonds. The Iranian government has traditionally financed its budget deficit through borrowing from the Central Bank. In contrast, many countries rely on bonds as the primary method to finance the budget deficit. The Iranian economy rejects this method based on religious considerations. Islamic Economists in Iran have proposed an alternative financial instrument called the Islamic Treasury Bills, which inherently differ from bonds. This study analyzes and compares how borrowing from the Central Bank, bonds, and Islamic Treasury Bills as budget financing methods affect macroeconomic variables, such as inflation, investment, and gross domestic product. This study uses a Dynamic stochastic general equilibrium model (DSGE) for an open economy by considering various methods of financing budget deficit. Findings suggest that using Islamic Treasury Bills to finance the government's budget deficit is preferable to the two other approaches, i.e., borrowing from the Central Bank and issuing bonds. https://iee.rihu.ac.ir/article_2091_1a66ae7e77cf7fa24fbd34df057a8ab6.pdf