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Construction of an Optimum Currency Area Index Anchored to the Gold Dinar: The Case of Selected Islamic Countries

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Listed:
  • Memet Agustiar

    (Department of Economics and Business, University of Tanjungpura, Pontianak, Indonesia,)

  • Fariastuti Djafar

    (Department of Economics and Business, University of Tanjungpura, Pontianak, Indonesia,)

  • Afrizal

    (Department of Economics and Business, University of Tanjungpura, Pontianak, Indonesia)

Abstract

This paper constructs an optimum currency area (OCA) index by using the gold price as a nominal anchor and substitute for the US $. The use of gold Dinar is in line with the spirit for implementing Sunnah money (gold Dinar). The method used for estimating the OCA-gold Index is the standard deviation (SD) of gold price variability. The five Islamic countries selected as the units of observation are listed among the top ten gold consumer countries worldwide. The findings of this paper may help us to understand how powerful gold can be as a benchmark or convergence criterion for a cycle co-movement measure of symmetry shock within the Islamic nations in comparison to the US $. As most of the OCA's conventional index have adopted fiat money ($ and Euro) as an anchor, this study offers an alternative model that employs the use of commodity money as the benchmark.

Suggested Citation

  • Memet Agustiar & Fariastuti Djafar & Afrizal, 2017. "Construction of an Optimum Currency Area Index Anchored to the Gold Dinar: The Case of Selected Islamic Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 51-56.
    • Handle: RePEc:eco:journ1:2017-03-8
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Optimum Currency Area; Gold Dinar; Islamic Nation; Anchor Currency;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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