To read this content please select one of the options below:

The impact of monetary systems on income inequity and wealth distribution: A case study of cryptocurrencies, fiat money and gold standard

Anwar Hasan Abdullah Othman (IIUM Institute of Islamic Banking and Finance (IIiBF), International Islamic University Malaysia, Kuala Lumpur, Malaysia)
Syed Musa Alhabshi (IIUM Institute of Islamic Banking and Finance (IIiBF), International Islamic University Malaysia, Kuala Lumpur, Malaysia)
Salina Kassim (IIUM Institute of Islamic Banking and Finance (IIiBF), International Islamic University Malaysia, Kuala Lumpur, Malaysia)
Adam Abdullah (IIUM Institute of Islamic Banking and Finance (IIiBF), International Islamic University Malaysia, Kuala Lumpur, Malaysia)
Razali Haron (IIUM Institute of Islamic Banking and Finance (IIiBF), International Islamic University Malaysia, Kuala Lumpur, Malaysia)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 3 April 2020

Issue publication date: 21 April 2020

2065

Abstract

Purpose

This study uses the autoregressive distributed lag model (ARDL) econometric approach to investigate empirically the effects of cryptocurrencies, the gold standard and traditional fiat money on global income inequality measured based on the Gini coefficient, and various ratios of income inequality distribution such as top 1 per cent, top 10 per cent, top 40 per cent and top 50 per cent.

Design/methodology/approach

The study uses the ARDL econometric approach.

Findings

The findings indicated that cryptocurrency and gold standard monetary systems contributed significantly to reducing global inequality of income and wealth distribution. Conversely, the traditional fiat money system contributes positively to global income and wealth inequality while also contributing significantly to their fluctuation.

Practical implications

This suggests that the fiat monetary system results in the coercive redistribution of income and wealth if governments pursue a social welfare policy. They must resolve this conflict between the current fiat monetary system and social policy by opting for an alternative monetary system such as cryptocurrency or gold standard. These alternative monetary systems offer the promise of resolving the income and wealth inequality associated with the traditional monetary system which are accompanied with the channels of inflation, lack of financial inclusion and debt creation, and to offer a more sustainable financial system.

Originality/value

The study recommends that monetary policy must be revisited to account for its direct effect on income and wealth redistribution to achieve social welfare goals.

Keywords

Citation

Othman, A.H.A., Musa Alhabshi, S., Kassim, S., Abdullah, A. and Haron, R. (2020), "The impact of monetary systems on income inequity and wealth distribution: A case study of cryptocurrencies, fiat money and gold standard", International Journal of Emerging Markets, Vol. 15 No. 6, pp. 1161-1183. https://doi.org/10.1108/IJOEM-06-2019-0473

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

Related articles