AN APPROACH TO INVESTMENT DECISION TOWARDS AN ISLAMIC ANALYSIS
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Abstract
The controversy among Islamic economists concerning investment decision criteria Jhr the project evaluation principally centers around the issue of discounting factor. This closely associates with the interest that Islam prohibits. Various papers have been published, either due to publication in journals or seminars and symposia, providing sophisticated analysis for seeking any solution to the problem. Unfortunately, this issue has remained unsettled, rather seemingly become more complicated.
This paper attempts to analyze the issue from the fundamental ideas of criteria determination. Generally speaking, a project is undertaken after the evaluation of its Feasibility. Neoclassical economics has developed the standard of valuation from the point of view of profitability. This lies on the concept of inter-temporal choices and therefore time preference consumption on the one hand, with Fisherian approach that makes the indifference curves interplay with its constraint, production possibility, and individual’s income. This process is simultaneously determined by the rate of interest. The problem is of dealing with this established concept by eliminating its fundamental instrument, interest rate. Keynesian analysis comes up in the discussion to consider an extension to such an approach in dealing with macro concept of investment decision criteria. However the road towards superiority of Islam is not supposed to be merely in its ethical precept, but also theoretically and empirically verified. This effort with its limitations provides the answer.Article Details
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Muqorobin, M. (2010). AN APPROACH TO INVESTMENT DECISION TOWARDS AN ISLAMIC ANALYSIS. Jurnal Ekonomi &Amp; Studi Pembangunan, 5(2), 101–124. Retrieved from https://journal.umy.ac.id/index.php/esp/article/view/3213
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References
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______, Essays in Islamic Economics, Leicester: The Islamic Foundation, 1995, p. 159-169.
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Mishan, E.J., Cost-Benefit Analysis, 3rd ed. London: George Allen & Unwin, 1982.
Naqvi, Syed Nawab Heidar, “Interest Rate and Intertemporal Allocative Efficiency in an Islamic Economy” in Mohammad Ariff, Ibid, pp. 75-95.
______, Ethics and Economics: An Islamic Synthesis. Leicester, UK: The Islamic Foundation. 1981/1401.
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Pasinetti, L.L., “Switches of Technique and the ‘Rate of Return’ in Capital Theory”, The Economic Journal (Sept, 1969), pp. 508-3 1.
Sang, Heng-Kang. Project Evaluation: Techniques and Practices for Developing Countries. Aldershot: Avebury, 1995.
the UNIDO, Manual for Evaluation of industrial Projects. New York: United Nations Publication, 1980.
Zarqa’, Muhammad Anas, “An Islamic Perspective on the Economics of Discounting in Project Evaluation”, in Ziauddin Ahmed et.al.,Ibid., pp.203-234.
Azhar, Rauf Ahmed , “A Theory of Optimal Investment Decision in an Islamic Economy”, in Ausaf Ahmad and Kazim Rawa Awan, (ed’s), Lectures in Islamic Economics. Jeddah: Islamic Research and Training Institute. Islamic Development Bank, 14 12/1992.
Branson, William H., Macroeconomic Theory and Policy, 3rd ed. (Singapore: Harper & Row Publisher, 1989).
Choudhry, Masudul Alam, “The Rate of Capitalization in Valuation Models in an Islamic Economics”, in Ziauddin Ahmed et al. Fiscal Policy and Resource Allocation in Islam, Jeddah. K.S.A.: International Center for Research in Islamic Economics, KAA University, and Islamabad: Institute of Policy Studies, 1983.
Dasgupta, Ajit K. And D.W. Pearce, Cost-Benefit Analysis: Theory and Practice, Hampshire: The Macmillan Press Ltd., 1972.
Dougherty, Christopher, Interest: and Profit, London: Methuen & Co. Ltd., 1980.
Dumenil, Gerard and Dominique Levy, The Economics of’ the Profit Rate: Competition, Crises and Historical tendencies in Capitalism, Aldershot, Hants: Edward Elgar Publishing Ltd., 1993.
Hallaq, Said, “Optimum investment Decision: An Islamic Perspective”, Islamic Quarterly, 38, iii, 1994, pp 205-2 13.
Henderson, James M. and Richard E. Quandt, Microeconomic Theory: A Mathematical Approach, 3rd ed.. Singapore: McGraw-Hill Book Company. 1980.
Al-Jarhi, M. Ali, and MA. Zarqa’, “Comments on Naqvi’s interest Rate and Intertemporal Allocative Efficiency.”, in Mohammad Ariff, Monetary and Fiscal Economics of Islam. Jeddah: International Centre for Research in Islamic Economics, KAAU, 1403/1982, pp. 96-106
Kahf, Monzer, “Time Value of Money and Discounting in Islamic Perspective: Revisited, Review of Islamic Economics, 3, ii, 1994, pp. 31-38.
Khan, M. Akram, “Resource Allocation in an Islamic Economy”, Islamic Quarterly, 29. 1985, pp. 240-250.
Khan, Muhammad Fahim, “Time Value of Money and Discounting in Islamic Perspective, Review of Islamic Economics? Majallat Nuhuth al-Iqtisadi al-Islami, 1, ii 1981, pp. 35-45.
______, Essays in Islamic Economics, Leicester: The Islamic Foundation, 1995, p. 159-169.
Keynes, J.M., .General Theory of Employment, Interest and Money, reproduced in Mortimer J. Adler (ed. In chief), Great Books of the Western World, vol. 57, (Chicago: Encyclopedia Britannica Inc.)
MacLachian, Fiona C., Keynes General Theory of Interest: A Reconsideration. London and New York: Routledge, 1993.
Mishan, E.J., Cost-Benefit Analysis, 3rd ed. London: George Allen & Unwin, 1982.
Naqvi, Syed Nawab Heidar, “Interest Rate and Intertemporal Allocative Efficiency in an Islamic Economy” in Mohammad Ariff, Ibid, pp. 75-95.
______, Ethics and Economics: An Islamic Synthesis. Leicester, UK: The Islamic Foundation. 1981/1401.
Nienhans, Jurg. A History of Economic Theory: Classic Contributions, 1720-1980. Baltimore and London: John Hopkins University Press, 1990.
Pasinetti, L.L., “Switches of Technique and the ‘Rate of Return’ in Capital Theory”, The Economic Journal (Sept, 1969), pp. 508-3 1.
Sang, Heng-Kang. Project Evaluation: Techniques and Practices for Developing Countries. Aldershot: Avebury, 1995.
the UNIDO, Manual for Evaluation of industrial Projects. New York: United Nations Publication, 1980.
Zarqa’, Muhammad Anas, “An Islamic Perspective on the Economics of Discounting in Project Evaluation”, in Ziauddin Ahmed et.al.,Ibid., pp.203-234.