Central Bank's Role in Implementing Monetary Policy through the Inter-Bank Market in Islamic Banking

The inter-bank market is one of the money market components whose goal is to improve the management of bank's liquidity and to facilitate the resources financing in the short run, and which plays an essential role in implementing the monetary policies. The central bank, as the regulator of this market, is responsible for all relevant affairs and participates in the market to implement the monetary policies. In this paper, using the descriptive and content-analysis method, we have tried to prove the hypothesis that "the central bank can proceed to design a lobby system based on discounting the securities with fixed return rate and using the instruments of open market operation, rediscount rate, required reserve rate, and quasi-open market operation in order to implement the monetary policy in the inter-bank market in Islamic banking." The results show that the central bank, by actively participating in the inter-bank market in Islamic banking, can implement the monetary policy in the framework of the lobby system based on discounting the securities with fixed rate of return.