DUAL MONETARY POLICY AND INCOME INEQUALITY IN INDONESIA

Abstract

This paper examines the effect of Indonesia’s dual monetary policy on income inequality. This issue of inequality in Indonesia remains significant, and failure to address it could lead to a major economic and social conflict. The studies of monetary policy on income inequality are still inconclusive. In Indonesia, there are limited literatures that show the effect of monetary policy on income inequality. This study shows that both monetary policies significantly affect income inequality in Indonesia where in the long run, Islamic monetary policy seems to not affecting the inequality. Hence, it can be concluded that the Islamic monetary system should be encourage to improve the inequality in Indonesia.