IDEAS home Printed from https://ideas.repec.org/a/abd/kauiea/v33y2020i2no2p25-46.html
   My bibliography  Save this article

Modern Monetary Theory or Islamic Monetary Theory of Value? Evidence from Malaysia النظرية النقدية الحديثة أم نظرية النقد الإسلامي للقيمة؟ أدلة من ماليزيا

Author

Listed:
  • Adam Abdullah

    (Associate Professor, College of Economics and Management, Al-Qasimia University, Sharjah, UAE)

Abstract

The purpose of this study is to contrast two recent monetary reform proposals involving the neo-chartalist Modern Monetary Theory (MMT) and the metallist Islamic Monetary Theory of Value (IMTV). Money is the common denominator for all economic transactions and yet, under the fiat standard, we have witnessed an exponential increase in prices and 425 instances of monetary, debt, and financial crises. Therefore, genuine monetary reform must protect the store of value function of money over the long term to protect wealth from confiscation by inflation thereby ensuring monetary and economic stability. This study adopts an MMT sectoral balance analysis of Malaysian macroeconomic data, as well as an IMTV analysis of Malaysian macroeconomic and gold price data to evaluate the effect on nominal and real prices. It finds that MMT provides no new insights about monetary theory, while making unsubstantiated claims about macroeconomic policy that would merely extend the highly inflationary monetary policies experienced under a centralized debt-based monetary system. Conversely, this study empirically establishes that a de-centralized monetary system based on the IMTV and the intrinsic value of pure gold (or silver), maintains its purchasing power and ensures that real prices are low and stable over the long term. الغرض من هذه الدراسة هو مقارنة اثنين من مقترحات الإصلاح النقدي الأخيرة التي تنطوي على النظرية النقدية الحديثة (MMT) ونظرية النقد الإسلامي للقيمة (IMTV). إن النقود هي القاسم المشترك لجميع المعاملات الاقتصادية، ومع ذلك فقد شهدنا، وفقًا للمعايير الورقية، زيادة هائلة في الأسعار و 425 حالة من الأزمات النقدية والدَّينية والمالية. لذلك، يجب أن يحمي الإصلاح النقدي الحقيقي وظيفة النقود كمخزن للقيمة على المدى الطويل لحماية الثروة من التآكل والنقص عن طريق التضخم وبالتالي ضمان الاستقرار النقدي والاقتصادي. تعتمد هذه الدراسة على تطبيق النظرية النقدية الحديثة MMT في تحليل الموازنة القطاعية لبيانات الاقتصاد الكلي الماليزي، بالإضافة إلى استخدام نظرية النقد الإسلامي للقيمة IMTV في تحليل بيانات الاقتصاد الكلي الماليزي وأسعار الذهب لتقييم التأثير على الأسعار الاسمية والحقيقية العامة. استنتجت الدراسة أن النظرية النقدية الحديثة MMT لا تقدم رؤى جديدة حول النظرية النقدية، في حين تقدم ادعاءات لا أساس لها حول سياسة الاقتصاد الكلي التي من شأنها أن توسع فقط السياسات النقدية التضخمية العالية التي تمر بها في ظل نظام نقدي مركزي قائم على الدين. على العكس من ذلك، تثبت هذه الدراسة تجريبيا أن النظام النقدي غير المركزي والمستند على نظرية النقد الإسلامي للقيمة IMTV والقيمة الجوهرية للذهب الخالص (أو الفضة)، تحافظ على قوتها الشرائية وتضمن انخفاض الأسعار الحقيقية واستقرارها على المدى الطويل.

Suggested Citation

  • Adam Abdullah, 2020. "Modern Monetary Theory or Islamic Monetary Theory of Value? Evidence from Malaysia النظرية النقدية الحديثة أم نظرية النقد الإسلامي للقيمة؟ أدلة من ماليزيا," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(2), pages 25-46, July.
    • Handle: RePEc:abd:kauiea:v:33:y:2020:i:2:no:2:p:25-46
    DOI: 10.4197/Islec.33-2.2
    as

    Download full text from publisher

    File URL: https://iei.kau.edu.sa/Files/121/Files/153867_33-02-02-AAdama-121020.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.4197/Islec.33-2.2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Knapp, Georg Friedrich, 1924. "The State Theory of Money," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number knapp1924.
    2. L. Randall Wray, 2024. "Modern Money Theory," Springer Books, Springer, edition 3, number 978-3-031-47884-0, April.
    3. Werner, Richard A., 2014. "Can banks individually create money out of nothing? — The theories and the empirical evidence," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 1-19.
    4. Adam Abdullah & Rizal Mohd Nor, 2018. "A Framework for the Development of a National Crypto-Currency," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(9), pages 1-14, September.
    5. Wynne Godley, 1996. "Money, Finance and National Income Determination: An Integrated Approach," Economics Working Paper Archive wp_167, Levy Economics Institute.
    6. Bernard Lietaer, 2017. "A Possibly Sharīʿah-Compatible Global Currency to Stabilize the Monetary System عملة عالمية متوافقة مع الشريعة الإسلامية لتحقيق استقرار النظام النقدي," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 30(2), pages 47-58, July.
    7. McLeay, Michael & Radia, Amar & Thomas, Ryland, 2014. "Money creation in the modern economy," Bank of England Quarterly Bulletin, Bank of England, vol. 54(1), pages 14-27.
    8. Hayek, F. A., 1995. "Contra Keynes and Cambridge," University of Chicago Press Economics Books, University of Chicago Press, number 9780226320656 edited by Caldwell, Bruce, September.
    9. Charlotte E. Ruebling, 1975. "Financing government through monetary expansion and inflation," Review, Federal Reserve Bank of St. Louis, vol. 57(Feb), pages 15-23.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Phil Armstrong, 2020. "Can Heterodox Economics Make a Difference?," Books, Edward Elgar Publishing, number 19964.
    2. Levrero, Enrico Sergio & Deleidi, Matteo, 2017. "The money creation process: A theoretical and empirical analysis for the US," MPRA Paper 81970, University Library of Munich, Germany.
    3. repec:abd:kauiea:v:30:y:2017:i:2:p:65-70 is not listed on IDEAS
    4. Joe Ament, 2019. "Toward an Ecological Monetary Theory," Sustainability, MDPI, vol. 11(3), pages 1-20, February.
    5. Vladan Hodulák & Oldřich Krpec, 2015. "Francouzsko-Německé monetární vztahy - pnutí v základech eurozóny [Franco-German Monetary Relations - Tensions Built Into the Eurozone Core]," Politická ekonomie, Prague University of Economics and Business, vol. 2015(4), pages 413-435.
    6. Mark Jo?b, 2017. "Reform Proposals in the Monetary System for Attaining Global Economic Stability مقترحات الإصلاح في النظام النقدي من أجل تحقيق الاستقرار الاقتصادي العالمي," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 30(2), pages 65-70, July.
    7. David Orrell, 2018. "Quantum Economics," Economic Thought, World Economics Association, vol. 7(2), pages 63-81, November.
    8. Xiong, Wanting & Wang, Yougui, 2017. "The impact of Basel III on money creation: A synthetic analysis," Economics Discussion Papers 2017-53, Kiel Institute for the World Economy (IfW Kiel).
    9. Josh Ryan-Collins, 2015. "Is Monetary Financing Inflationary? A Case Study of the Canadian Economy, 1935-75," Economics Working Paper Archive wp_848, Levy Economics Institute.
    10. Donaldson, Jason Roderick & Piacentino, Giorgia & Thakor, Anjan, 2018. "Warehouse banking," Journal of Financial Economics, Elsevier, vol. 129(2), pages 250-267.
    11. Robert S. Kravchuk, 2020. "Post‐Keynesian Public Budgeting & Finance: Assessing Contributions From Modern Monetary Theory," Public Budgeting & Finance, Wiley Blackwell, vol. 40(3), pages 95-123, September.
    12. Li, Boyao & Xiong, Wanting & Chen, Liujun & Wang, Yougui, 2017. "The impact of the liquidity coverage ratio on money creation: A stock-flow based dynamic approach," Economic Modelling, Elsevier, vol. 67(C), pages 193-202.
    13. Jörg Bibow, 2013. "Lost at Sea: The Euro Needs a Euro Treasury," IMK Studies 35-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    14. Wang, Xuan, 2023. "A macro-financial perspective to analyse maturity mismatch and default," Journal of Banking & Finance, Elsevier, vol. 151(C).
    15. Xing, Xiaoyun & Wang, Mingsong & Wang, Yougui & Stanley, H. Eugene, 2020. "Credit creation under multiple banking regulations: The impact of balance sheet diversity on money supply," Economic Modelling, Elsevier, vol. 91(C), pages 720-735.
    16. Avner Offer, 2017. "The market turn: from social democracy to market liberalism," Economic History Review, Economic History Society, vol. 70(4), pages 1051-1071, November.
    17. Cyril Pitrou, 2015. "Graph representation of balance sheets: from exogenous to endogenous money," Papers 1504.03895, arXiv.org, revised Jan 2018.
    18. Steve Keen, 2015. "Post Keynesian Theories of Crisis," American Journal of Economics and Sociology, Wiley Blackwell, vol. 74(2), pages 298-324, March.
    19. Li, Boyao & Wang, Yougui, 2020. "Money creation within the macroeconomy: An integrated model of banking," International Review of Financial Analysis, Elsevier, vol. 71(C).
    20. Richters, Oliver & Siemoneit, Andreas, 2017. "Consistency and stability analysis of models of a monetary growth imperative," Ecological Economics, Elsevier, vol. 136(C), pages 114-125.
    21. Bofinger, Peter & Geißendörfer, Lisa & Haas, Thomas & Mayer, Fabian, 2021. "Discovering the True Schumpeter - New Insights into the Finance and Growth Nexus," CEPR Discussion Papers 16851, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Modern monetary theory; Islamic monetary theory; Islamic economics. النظرية النقدية الحديثة، نظرية النقد الإسلامي، الاقتصاد الإسلامي.;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:abd:kauiea:v:33:y:2020:i:2:no:2:p:25-46. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: King Abdulaziz University, Islamic Economics Institute. (email available below). General contact details of provider: https://edirc.repec.org/data/cikausa.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.