Monetary Integration Between Jordan and Palestine

Monetary integration could have immense implications for both Palestine and Jordan. Two of what are regarded as prerogative functions of an independent state (monetary policy and control over the exchange rate) must be surrendered to a central monetary authority of the union. This will require the prior establishment of a central executive body empowered to rule above the national level. Any lesser arrangements will not insure the permanence of exchange rate parities within the union and will disturb the process of integration. In general, monetary unification cannot proceed without a parallel move towards central fiscal and budgetary unification. This will enable the monetary union to cope with problems concerning the co-ordination of economic policy at the union level, problems of regional inequality and fair sharing between the two countries of the costs and benefits of integration. Nevertheless, given the existing profound macroeconomic differences between the two countries, which would produce different policy preferences and attitudes that are difficult to coordinate without provoking national interests, this study comes to the conclusion that the transition to monetary unification should be gradual.