This never crossed my mind before, but here’s a quote from the Times on Iran’s difficulty fighting inflation:
“Economists said the Iran government is hampered in its ability to control inflation partly because of Islamic prohibitions on charging interest, which prevents banks from offering attractive rates that would encourage Iranians to keep their money in savings accounts.”
The suggestion is that they’ll not only have difficulty fighting inflation, but we could also see money leaving banks, as it did in the US in the 1980s under Reg Q, when deposit rates were fixed. If anyone knows more about this, please pass it on.
Posted by Dave Backus