Islamic Currency and Monetary Mechanisms versus Keynesian and Other Monetary Regimes: A KSCCN Learner Note on Currency Design, Asset Backing, Money Demand and Supply, Velocity, Profit-Sharing, and the IS-LM Framework

Abstract

This note provides learners with a structured comparison of the primary Islamic monetary model and contemporary Keynesian (and related) regimes. It covers currency design and the role of metal or real assets; money demand and supply; the velocity of money; profit-sharing versus interest-based contracts; monetary instruments and transmission; and the implications for the IS-LM framework. Additional sections address banking structure, price stability, practical hybrids, and learning points. The "primary Islamic model" refers to the classical and reconstructed framework associated with M. Umer Chapra (Towards a Just Monetary System, 1985) and related equity-based banking literature: money principally as a medium of exchange and unit of account; prohibition of riba; preference for risk-sharing over pure debt; and a bias toward linking monetary expansion to real assets or productive activity. Contemporary Keynesian practice centres on a short-term policy interest rate under a fiat, fractional-reserve system that manages aggregate demand through liquidity preference, credit channels and, when necessary, balance-sheet expansion. KSCCN learner note (KSCCN-LN-MON-ISL-KEY-2026-10), Series on Critical AI, Digital Sovereignty and Economic Diplomacy, 11 October 2026. Dr. Syed Muntasir Mamun, ORCID 0000-0001-6845-2853. The views expressed are those of the author.