The impact of monetary systems on income inequity and wealth distribution

Abstract

PurposeThis 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/approachThe study uses the ARDL econometric approach.FindingsThe 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 implicationsThis 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/valueThe study recommends that monetary policy must be revisited to account for its direct effect on income and wealth redistribution to achieve social welfare goals.

Blockchain technology, macroeconomic uncertainty and investment efficiency

“…The main reason is that blockchain technology has advantages in countering macroeconomic risks and makes cryptocurrency “digital gold” (Kaponda, 2018). In addition, cryptocurrency has contributed significantly to reducing global income inequality and wealth distribution (Othman et al , 2020).…”

Is pass-through of the exchange rate to restaurant and hotel prices asymmetric in the US? Role of monetary policy uncertainty

“…Despite the restaurant and hotel industry’s strong performance, the industry remains vulnerable to various uncertainties, which inhibit the contributions of the industry to global tourism and economic expansion (Akadiri et al 2019 , 2020 ; Othman et al 2020 ; Alola et al 2020 ).…”

Optimum investor portfolio allocation in new age digital assets

“…The Cantillon effect hypothesis has been supported in several studies with empirical evidence that rapid fiat money printing led to asymmetric wealth distribution. The rich got richer, while the lowerincome population got few benefits (Bagchi et al, 2019;Balac, 2008;Othman et al, 2020).…”

“…The Cantillon effect hypothesis has been supported in several studies with empirical evidence that rapid fiat money printing led to asymmetric wealth distribution. The rich got richer, while the lower-income population got few benefits (Bagchi et al , 2019; Balac, 2008; Othman et al , 2020). During the 2008 global financial crisis, the central banks printed enormous fiat money to revive the economy and repair confidence in the financial markets.…”