An analysis of zakat expenditure and real output: theory and evidence

This study advocates zakat as the major and potent fiscal policy instrument in an Islamic state. Zakat plays its role in macroeconomic stabilization through nondiscretionary and discretionary fiscal policy. The built-in stabilizer mechanism occurs when zakat collection is automatically reduced du...

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Main Author:	Yusoff, Mohammed
Format:	Article
Language:	English
Published:	KENMS-IIUM Press 2010
Subjects:	HJ7451 Expenditures. Government spending
Online Access:	http://irep.iium.edu.my/25906/ http://irep.iium.edu.my/25906/ http://irep.iium.edu.my/25906/1/AN_ANALYSIS_OF_ZAKAT_EXPENDITURE_AND.pdf

id	iium-25906
recordtype	eprints
spelling	iium-259062014-02-05T03:30:03Z http://irep.iium.edu.my/25906/ An analysis of zakat expenditure and real output: theory and evidence Yusoff, Mohammed HJ7451 Expenditures. Government spending This study advocates zakat as the major and potent fiscal policy instrument in an Islamic state. Zakat plays its role in macroeconomic stabilization through nondiscretionary and discretionary fiscal policy. The built-in stabilizer mechanism occurs when zakat collection is automatically reduced during recession, giving more money to the people to spend—which tends to stimulate the economy—while during the boom period more zakat is collected, reducing the ability of people to spend—which tends to dampen economic activities. These reduce macroeconomic fluctuations. As a discretionary fiscal policy, the government varies the disbursement of zakat to the recipients whenever necessary during the phases of the business cycle. During the expansion phase, the government decreases zakat disbursement to reduce aggregate spending. Likewise, zakat disbursement is increased when the economy is in the downswing to increase aggregate spending. Empirical evidence using Malaysian data supports the hypothesis that zakat spending is a potent fiscal instrument to improve economic performance. The results of panel data regression analysis indicate that zakat expenditure can significantly explain the variation in real output. This suggests that Muslim countries should make serious effort to improve the efficiency of zakat collection and spending to generate growth and development of the ummah. KENMS-IIUM Press 2010 Article PeerReviewed application/pdf en http://irep.iium.edu.my/25906/1/AN_ANALYSIS_OF_ZAKAT_EXPENDITURE_AND.pdf Yusoff, Mohammed (2010) An analysis of zakat expenditure and real output: theory and evidence. IIUM Journal of Economics and Management, 18 (2). pp. 139-160. ISSN 1394-7680 http://www.iium.edu.my/enmjournal/content.php
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HJ7451 Expenditures. Government spending
spellingShingle	HJ7451 Expenditures. Government spending Yusoff, Mohammed An analysis of zakat expenditure and real output: theory and evidence
description	This study advocates zakat as the major and potent fiscal policy instrument in an Islamic state. Zakat plays its role in macroeconomic stabilization through nondiscretionary and discretionary fiscal policy. The built-in stabilizer mechanism occurs when zakat collection is automatically reduced during recession, giving more money to the people to spend—which tends to stimulate the economy—while during the boom period more zakat is collected, reducing the ability of people to spend—which tends to dampen economic activities. These reduce macroeconomic fluctuations. As a discretionary fiscal policy, the government varies the disbursement of zakat to the recipients whenever necessary during the phases of the business cycle. During the expansion phase, the government decreases zakat disbursement to reduce aggregate spending. Likewise, zakat disbursement is increased when the economy is in the downswing to increase aggregate spending. Empirical evidence using Malaysian data supports the hypothesis that zakat spending is a potent fiscal instrument to improve economic performance. The results of panel data regression analysis indicate that zakat expenditure can significantly explain the variation in real output. This suggests that Muslim countries should make serious effort to improve the efficiency of zakat collection and spending to generate growth and development of the ummah.
format	Article
author	Yusoff, Mohammed
author_facet	Yusoff, Mohammed
author_sort	Yusoff, Mohammed
title	An analysis of zakat expenditure and real output: theory and evidence
title_short	An analysis of zakat expenditure and real output: theory and evidence
title_full	An analysis of zakat expenditure and real output: theory and evidence
title_fullStr	An analysis of zakat expenditure and real output: theory and evidence
title_full_unstemmed	An analysis of zakat expenditure and real output: theory and evidence
title_sort	analysis of zakat expenditure and real output: theory and evidence
publisher	KENMS-IIUM Press
publishDate	2010
url	http://irep.iium.edu.my/25906/ http://irep.iium.edu.my/25906/ http://irep.iium.edu.my/25906/1/AN_ANALYSIS_OF_ZAKAT_EXPENDITURE_AND.pdf
first_indexed	2023-09-18T20:38:36Z
last_indexed	2023-09-18T20:38:36Z
_version_	1777409213785440256

An analysis of zakat expenditure and real output: theory and evidence

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