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Is the dollar peg suitable for the largest economies of the Gulf Cooperation Council?

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  • Jay, Squalli

Abstract

The slumping of the GCC currencies against other major currencies and the ensuing rising imported inflation have sparked an ongoing debate about the viability of the dollar peg. This paper extends and applies the contribution of Berger et al. (2001) to the largest economies of the GCC, namely Saudi Arabia, Qatar, and the UAE, by introducing a foreign inflation dimension. Empirical estimations suggest little or no evidence supporting the suitability of a fixed exchange rate regime in any of the three analyzed economies. It is this paper's contention that policy makers ought to play an immediate and active role in identifying a suitable more flexible exchange rate regime as well as an achievable timeline and road map to effectively abandoning the dollar peg.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 21 (2011)
Issue (Month): 4 (October)
Pages: 496-512

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Handle: RePEc:eee:intfin:v:21:y:2011:i:4:p:496-512

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Web page: http://www.elsevier.com/locate/intfin

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Keywords: Exchange rate regime Inflation Dollar peg Gulf Cooperation Council GCC;

References

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Cited by:
  1. Al-Abri, Almukhtar Saif, 2014. "Optimal exchange rate policy for a small oil-exporting country: A dynamic general equilibrium perspective," Economic Modelling, Elsevier, vol. 36(C), pages 88-98.

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