Analysis of the Independency Degree of Monetary Authority in Iran Based on a Jurisprudential Rule

Economic stabilization as one of the objectives of macroeconomic needs efficient financial and monetary institutions. That is why literature of central bank independency and international experiences in this field became more important and relevant. However, conventional indices of the independency of monetary authority do not due to any Islamic jurisprudential rules related to banking. Therefore, the Islamic banking system needs a new approach for estimation of the independency degree of the monetary authority. In the present study, initially, international experiences on the central bank independency are mentioned. Then, by explanation of the word Gharar it is shown that the scope of the jurisprudential rule of denying Gharar is not only in the field of transaction contractions, but rather in monetary policy. Because future monetary policies concerning the increase or decrease in inflation, effect on the present value of agencies, a monetary policy based on Gharar increases the uncertainty of agents’ behaviors and increases their expected inflation or recession. Then, by classification of the degree of Gharar grounded monetary policy based on certainty, suspicion on, doubt, illusion and complete uncertainty of agencies to monetary authority, in an augmented Philips curve, we prove that, increasing in the degree of Gharar based monetary policy leads to the a mounting increase of inflation. So, the object of stabilization would lead to fail. Finally, we present a pattern for formation of independent monetary authority based on classification of degree of Gharar based monetary policy.