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The Implementation of a Dual Monetary System in Indonesia

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  • Imamudin Yuliadi

Abstract

Purpose: This study explains the economic implications of the implementation of a dual monetary system in Indonesia's macroeconomic performance. The research is essential to know the difference between the influence of Islamic monetary system and conventional monetary system in influencing Indonesia's macroeconomic performance. Design/Methodology/Approach: The research model is a vector autoregressive (VAR) to explain the impact of monetary on real economic performance. The variables used in this study were GDP, money supply (M2), core money (Mo), BI rate, consumer price index (CPI), gold price, composite stock price index (CSPI), mudharabah profit-sharing rate, Musharaka profit-sharing rate, Indonesian production index (IPI), Jakarta Islamic Index (JII), and exchange rates. Findings: The results of this study revealed that there were significant differences between the conventional monetary system and the Islamic monetary system in driving the economy in real terms. Practical implications: The recommendations of this study are the need for integration and coordination in the Islamic monetary system and the conventional monetary system to improve monetary transmission mechanisms in the real sector. Originality/Value: The study analyzes the implications of a dual monetary system implementation in Indonesia. Theoretically, there is a difference between the monetary transmission mechanism in the Islamic monetary system and the monetary transmission mechanism in the conventional monetary system.

Suggested Citation

  • Imamudin Yuliadi, 2020. "The Implementation of a Dual Monetary System in Indonesia," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 28-39.
    • Handle: RePEc:ers:ijebaa:v:viii:y:2020:i:3:p:28-39
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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary transformation; dual monetary system; monetary stability.;
    All these keywords.

    JEL classification:

    • 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
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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