Controlling Inflation Without Interest Rates: An Islamic Macroeconomic Framework for Sustainable Growth

Abstract

Inflation management in conventional macroeconomics is predominantly driven by interest rate adjustments, which conflict with the foundational principles of Islamic economic thought that prohibit riba. This study explores alternative Islamic macroeconomic tools for managing inflation without relying on interest rate mechanisms. Employing a conceptual and theoretical methodology, the paper draws on foundational Islamic economic concepts such as hisbah, zakat, and mudarabah to construct an alternative anti-inflation framework. It critically examines the theoretical consistency and empirical plausibility of these instruments in ensuring macroeconomic stability and equitable growth. Key findings suggest that Islamic mechanisms can mitigate inflation through moral governance, redistributive policies, and productive investment, aligning with maqāṣid al-sharīʿah. The implications are twofold: they highlight the viability of an interest-free economic model while also expanding the policy discourse in monetary economics. This approach underscores the need for a paradigm shift that is both ethically grounded and economically sustainable. The study contributes to the growing literature advocating pluralistic economic models in the face of global economic volatility.