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On the Optimality of GCC Monetary Union: Asymmetric Shocks Assessments

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  • Atef Saad Alshehry

    ()
    (College of Administrative Sciences, Najaran University, Saudia Arabia)

  • Sarra Ben Slimane

    ()
    (College of Administrative Sciences, Najaran University, Saudia Arabia)

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    Abstract

    The main objective of this paper is to investigate the desirability and the feasibility of establishing a monetary union in GCC countries. The paper assesses the symmetry of the external shocks that the economies are subject to and the degree of synchronization in long run economic activities and in short run business cycle. The paper establishes the following results: (i) In general correlation results of the various shocks indicate that GCC countries are still far forming an optimal currency union given the fact that a large number of correlation¡¯s coefficients are not positive meaning that shocks are asymmetric; (ii) However, decomposition variance results argue well for feasibility of currency union across GCC countries.

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    File URL: http://www.bapress.ca/ref/v3-1/2013105.pdf
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    Bibliographic Info

    Article provided by Better Advances Press, Canada in its journal Review of Economics & Finance.

    Volume (Year): 3 (2013)
    Issue (Month): (February)
    Pages: 49-62

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    Handle: RePEc:bap:journl:130105

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    Related research

    Keywords: Monetary Union; GCC countries; convergence criteria; Structural VAR model; Asymmetric shocks;

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    1. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc.
    2. Michael Sturm & Nikolaus Siegfried, 2005. "Regional monetary integration in the member states of the Gulf Cooperation Council," Occasional Paper Series, European Central Bank 31, European Central Bank.
    3. Junichi Goto & Koichi Hamada, 1994. "Economic Preconditions for Asian Regional Integration," NBER Chapters, National Bureau of Economic Research, Inc, in: Macroeconomic Linkage: Savings, Exchange Rates, and Capital Flows, NBER-EASE Volume 3, pages 359-388 National Bureau of Economic Research, Inc.
    4. Belkacem Laabas and Imed Limam, . "Are GCC Countries Ready for Currency Union?," API-Working Paper Series 0203, Arab Planning Institute - Kuwait, Information Center.
    5. Zaidi, Iqbal, 1990. "Monetary coordination among the gulf cooperation council countries," World Development, Elsevier, Elsevier, vol. 18(5), pages 759-768, May.
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