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What Are the Potential Economic Benefits of Enlarging the Gulf Cooperation Council?

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  • Selim Elekdag
  • Saade Chami
  • Ivan Tchakarov

Abstract

This paper uses a variant of the IMF''s Global Economy Model (GEM) to estimate the macroeconomic effects of Yemen''s full accession into the Gulf Cooperation Council (GCC). After calibrating the model to Yemen and the GCC countries, several simulations were carried out to estimate the potential impact of economic integration on both. The paper draws two fundamental conclusions. First, further steps in regional integration would enhance competition and produce large economic benefits for both Yemen and the GCC countries. In particular, we show that in some cases economic integration could increase GDP in Yemen by as much as 18 percent and in the GCC by as much as 20 percent over the long run. Second, even if market structures do not improve substantially, GCC enlargement can still generate substantial spillover gains with consumption increasing by up to 7 percent in Yemen and 8 percent in the GCC, respectively.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/152.

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Length: 33
Date of creation: 01 Aug 2004
Date of revision:
Handle: RePEc:imf:imfwpa:04/152

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Keywords: Exchange rate regimes; Currency pegs; Economic models; competition; economic integration; regional integration; intermediate goods; elasticity of substitution; perfect competition; investment goods; open economy; imported goods; imperfect competition; international trade; monetary union; monopolistic competition; imported inputs; tradable goods; domestic prices; income convergence; world economy; degree of competition; competitive goods; trade creation; monopolistic structure; trade impact; skilled labor; endogenous growth; political economy; domestic economy; monopoly; monopolistic supplier; monopoly power; domestic market; promoting competition; per capita income; export market; external tariff; factor endowments; increasing competition; imported intermediate; reducing barriers; employment growth; import price; intermediate inputs; investment flows; terms of trade; adjustment process; unskilled labor; integrating countries; import demand; return on capital; trade liberalization; intensity of competition; closed economy;

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References

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Citations

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Cited by:
  1. Takagi, Shinji, 2012. "Establishing Monetary Union in the Gulf Cooperation Council: What Lessons for Regional Cooperation?," ADBI Working Papers 390, Asian Development Bank Institute.
  2. Selim Elekdag, 2012. "Social Spending in Korea," IMF Working Papers 12/250, International Monetary Fund.
  3. Shafik Hebous, 2006. "On the Monetary Union of the Gulf States," Kiel Advanced Studies Working Papers 431, Kiel Institute for the World Economy.

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