Pros and Cons of Fiat Money and the Use of Dinar-Based Currency as a Benchmark for Exchange Rates



  • Tassyah Aprilia Sujono Faculty of Economics and Business, Jember University,Indonesia
  • Dwi Yuliana Hardiyanti Faculty of Economics and Business, Jember University,Indonesia
  • Indah Dwi Sri Jayanti Faculty of Economics and Business, Jember University,Indonesia


Dinar Dirham, Fiat Money, Inflation, Economic Growth, Exchange Rates


This article examines the failure of fiat money due to its artificial nature and the importance of a stable currency. This article examines the importance of stable cash and the disillusionment with government-issued currencies due to their counterfeit nature. We used a qualitative research method to review the literature on the use of fiat currency in Islamic economics and the stability of gold and silver as currency. We find that the stability of fiat money and its exchange rate in relation to the dinar dirham is the subject of research on the effect of inflation on economic expansion. To measure the exchange rate, the perspectives of experts on fiat money and the Dirham and Dinar currencies are compared in this study. By utilizing the functions of the Dirham and Dinar currencies, the results show the efficiency of the exchange rate policy with fiat money. Concentration also looks at the positive side of various currencies and suggests that currencies with natural value, such as the Dinar, are a better choice for protecting wealth and maintaining economic stability. The use of dinars and dirhams as cash is supported by several previous studies, while the use government issued currency is acceptable as long as there is no reasonable prohibition on Islamic sources.