The Effect of Zakat on Consumption Stability in the Iranian Economy in the form of the New Keynesian DSGE Model

Household Consumption Decisions Have a Significant Impact on The Behavior of Macroeconomic Variables in The Short and Long Run. One of The Factors Affecting the Consumption of Households in an Islamic Society Is Zakat, Which Is Established in Islam to Combat Poverty and Acts as a Tool to Redistribute Income and Wealth from The Rich to The Poor and Plays an Important Role In Ensuring Justice and Economic Welfare of Society. In Fact, Zakat Has Various Effects on Macroeconomic Variables, Including Consumption, and Can Play an Important Role in Mitigating Shocks to The Economy and Establishing Economic Stability. The main Purpose of this Study was to Investigate the Effect of Zakat on Consumption Stability in the Iranian Economy using Seasonal Time Series Data During the Period 1379 to 1396. To this end, a new Keynesian Stochastic Dynamic General Equilibrium (DSGE) Model in a Closed Economy is Defined for the Iranian Economy as an Islamic Country with an Emphasis on Zakat Payments, and then Compares the Effects of Productivity and Monetary Shocks on Consumption in The two systems of conventional economics and Islamic economics are discussed. The Results Show That the Islamic Economic System (With Zakat) Has Been Able to Absorb Economic Shocks and Smooth Consumption Fluctuations in the Iranian Economy and Zakat Can Act as an Automatic Economic Stabilization Tool. Also, by Reducing the Consumption of Zakat Givers and also Increasing the Consumption of Zakat Recipients, it is Concluded that Zakat Improves the Income Distribution and Reduces the Class Gap in Iran.