Interest-free economy

An interest-free economy or interest free economy is an economy that does not have pure interest rates. An interest free economy may use either barter, credit, or money as its medium of exchange. Historically, there has been a taboo against usury and charging interest rates across many cultures and religions. In some contexts, "interest-free economy" may refer to a zero interest-rate policy, a macroeconomic concept for describing an economy that is characterized by a low nominal interest rate.

The total interest rate typically consists of four components: pure (risk-free) interest, a risk premium, expected inflation or deflation, and administrative costs. In an interest-free economy, the pure interest rate component of the total interest rate would not exist, by definition. Depending on how the economy is structured, the other three components of interest of the total interest may or may not remain, so an interest-free economy does not necessarily have to be free of all types of interest. Banks could still profit from loaning money in an interest-free economy, if they are paid by the administrative costs component of the total interest rate.