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Economic, Political, and Institutional Prerequisites for Monetary Union Among the Members of the Gulf Cooperation Council

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  • Willem Buiter

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Abstract

The paper reviews the arguments for and against monetary union among the six members of the Gulf Cooperation Council - the United Arab Emirates, the State of Bahrain, the Kingdom of Saudi Arabia, the Sultanate of Oman, the State of Qatar and the State of Kuwait. Both technical economic arguments and political economy considerations are discussed I conclude that there is an economic case for GCC monetary union, but that it is not overwhelming. The lack of economic integration among the GCC members is striking. Without anything approaching the free movement of goods, services, capital and persons among the six GCC member countries, the case for monetary union is mainly based on the small size of all GCC members other than Saudi Arabia, and their high degree of openness. Indeed, even without the creation of a monetary union, there could be significant advantages to all GCC members, from both an economic and a security perspective, from greater economic integration, through the creation of a true common market for goods, services, capital and labour, and from deeper political integration. The political arguments against monetary union at this juncture appear overwhelming, however. The absence of effective supranational political institutions encompassing the six GCC members means that there could be no effective political accountability of the GCC central bank. The surrender of political sovereignty inherent in joining a monetary union would therefore not be perceived as legitimate by an increasingly politically sophisticated citizenry. I believe that monetary union among the GCC members will occur only as part of a broad and broadly-based movement towards far-reaching political integration. And there is little evidence of that as yet.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s11079-008-9081-9
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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 19 (2008)
Issue (Month): 5 (November)
Pages: 579-612

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Handle: RePEc:kap:openec:v:19:y:2008:i:5:p:579-612

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Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: Currency union; GCC; Convergence; Exchange rate regime; E42; E52; E63; F33; F42;

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Citations

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Cited by:
  1. George S. Tavlas, 2008. "The Benefits and Costs of Monetary Union in Southern Africa: A Critical Survey of the Literature," Working Papers 70, Bank of Greece.
  2. Durevall, Dick, 2011. "East African Community: Pre-conditions for an Effective Monetary Union," Working Papers in Economics 520, University of Gothenburg, Department of Economics.
  3. Ben Naceur, Sami & Bakardzhieva, Damyana & Kamar, Bassem, 2012. "Disaggregated Capital Flows and Developing Countries’ Competitiveness," World Development, Elsevier, vol. 40(2), pages 223-237.
  4. Roel Beetsma & Massimo Giuliodori, 2010. "The Macroeconomic Costs and Benefits of the EMU and Other Monetary Unions: An Overview of Recent Research," Journal of Economic Literature, American Economic Association, vol. 48(3), pages 603-41, September.
  5. Abdulghaffar, Mahmood & Al-Ubaydli, Omar & Mahmood, Omar, 2014. "The Malfunctioning of the Gulf Cooperation Council Single Market: Features, Causes and Remedies," MPRA Paper 55413, University Library of Munich, Germany.

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