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GCC Monetary Union and the Degree of Macroeconomic Policy Coordination

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Author Info

  • Bassem Kamar
  • Samy Ben Naceur

Abstract

Coordinating macroeconomic policies is a pre-requisite to a successful launch of the common currency in the GCC countries. Relying on the Behavioral Equilibrium Exchange Rate approach as a theoretical framework, we apply the Pooled Mean Group methodology to determine the similarity of the impact of a selected set of macroeconomic indicators on the real exchange rate in each country. Our empirical evidence points to a clear coordination of monetary policy, fiscal policy, government consumption, and openness across the member countries. While RER misalignments also show a substantial convergence building over time, differences in the misalignments of the two polar cases remain rather substantial, calling for further coordination and policy harmonization.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/249.

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Length: 33
Date of creation: 01 Oct 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/249

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Related research

Keywords: Central bank policy;

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Cited by:
  1. Ashraf Nakibullah, 2011. "Monetary Policy and Performance of the Oil-Exporting Gulf Cooperation Council Countries," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 10(2), pages 139-157, August.
  2. Rafiq, M.S., 2011. "The optimality of a gulf currency union: Commonalities and idiosyncrasies," Economic Modelling, Elsevier, vol. 28(1-2), pages 728-740, January.
  3. Buiter, Willem H, 2008. "Economic, Political, and Institutional Prerequisites for Monetary Union Among the Members of the Gulf Cooperation Council," CEPR Discussion Papers 6639, C.E.P.R. Discussion Papers.
  4. Virginie Coudert & Cécile Couharde & Valérie Mignon, 2008. "Do Terms of Trade Drive Real Exchange Rates? Comparing Oil and Commodity Currencies," Working Papers 2008-32, CEPII research center.
  5. Abdelghani, Echchabi & Osman, Sayid & Isares, Mahamad & Khalid, Sorhiran & Zulhilmi, Zulkifli, 2011. "The implementation of Gulf Dinar among the GCC member countries and its possible impacts," MPRA Paper 28245, University Library of Munich, Germany.
  6. Bassem Kamar & Jean-Etienne Carlotti & Russell C. Krueger, 2009. "Establishing Conversion Values for New Currency Unions: Method and Application to the planned Gulf Cooperation Council (GCC) Currency Union," IMF Working Papers 09/184, International Monetary Fund.
  7. Jay, Squalli, 2011. "Is the dollar peg suitable for the largest economies of the Gulf Cooperation Council?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(4), pages 496-512, October.

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