The impact of the compulsory cash reserve on generating money in Jordanian conventional and Islamic banks on the money supply, an analytical study from the period (2011-2020)

Abstract

The study objectives are to know the concept of the compulsory cash reserve and the money supply, and to clarify the concept of conventional and Islamic banks and their reality in Jordan and the extent of their ability to generate money, and to show the impact of the compulsory cash reserve in generating money and money supply, this is through a presentation of the statistical analysis models for the independent study variables represented in the cash reserve and the factors affecting it, and the extent of its impact on the dependent variable represented in the money supply.

The study included three sections, the first section dealt with the cash reserve and the money supply and the relationship between them, the second topic dealt with the role of the cash reserve in generating money in Islamic and conventional banks, and the third topic: the study methodology and statistical analysis.

The study concluded that the compulsory cash reserve policy works to limit the ability of Islamic banks to generate money compared to usurious banks, and this is due to the commodity nature of the financing formulas practiced by Islamic banks, which makes the amount of money creation and credit expansion linked to production, which helps them to achieve The balance between the commodity current and the monetary current. While the study concluded that the policy of the compulsory reserve works to reduce the money supply in the event of an increase in the percentage of the compulsory reserve and to increase the money supply in the event of a decrease in the percentage of the compulsory reserve.

The study recommended a set of recommendations, the most important of which is that an alternative monetary policy must be found to the monetary reserve policy, especially in Islamic banks, because it is completely different for commercial banks.