Assessing the Impact of Currency Arrangements on Income Distribution in OECD Countries and OPEC Member States

Many economists believe that unequal distribution of income is one of the main conditions for economic growth. With the integration of the world economy and the increasing development of international interactions, countries can no longer ignore the role of the foreign sector in macroeconomic policy making. In this mean, currency arrangementscan have macroeconomic effects. The method of this research is analytical descriptive which uses regression analysis with GMM method. The field of study includes the OPEC member countries and the Organization for Economic Cooperation and Development (OECD), which most of the OPEC countries are Islamic countries and have a fixed currency regime and average or bad income distribution. The annual data are used for empirical analysis for each country and include the review period for the years 2007-2018. The results of this study show that in comparison with foreign exchange regimes, the independent variable of the managed floating exchange rate index on the dependent variable of Gini coefficient is negative and significant for the OPEC group. Also, the effect of the independent variable of the nail exchange rate index on the dependent variable of Gini coefficient for the OPEC group is positive and significant. In fact, for both groups the use of a floating exchange rate regime can reduce income inequality better than a fixed exchange rate regime. The results also show that the floating currency system has no significant effect on inequality in OPEC countries.