A monetary alternative for the Palestinian economy : a Palestinian currency

Abstract

On historical and economic grounds this paper argues for a Palestinian currency. Israel refusal of this issue is mainly economic, namely, seiniorage revenue it extracts from the circulation of the Israeli shekel in the West Bank and Gaza Strip. This refusal endangers the whole peace process in the Middle East. A currency board system for the Palestinian National Authority (PNA) with a 100% reserve requirement by backing it up by the Jordanian dinar could yield seiniorage revenue for the PNA to implement a major part of its development projects and create jobs for an impoverished population half of which is unemployed. However, regional institutions must be created to take care of the distributional issues of the benefits of the peace process in the region.