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The GCC Monetary Union: Some Considerations for the Exchange Rate Regime

Author

Listed:
  • Mr. Behrouz Guerami
  • Mr. S. Nuri Erbas
  • Mr. George T. Abed

Abstract

We compare the dollar peg to a dollar-euro basket peg as alternative exchange rate regimes for the incipient Gulf Cooperation Council (GCC) currency union. Quantitative evidence suggests basket peg does not dominate dollar peg for improving external stability. However, as GCC exports and external financial assets become more diversified, a more flexible exchange policy may be necessary for competitiveness and stability. Pegging the prospective common GCC currency to a basket, like the dollar-euro basket, may provide a conservative transitional strategy toward a more flexible exchange rate policy.

Suggested Citation

  • Mr. Behrouz Guerami & Mr. S. Nuri Erbas & Mr. George T. Abed, 2003. "The GCC Monetary Union: Some Considerations for the Exchange Rate Regime," IMF Working Papers 2003/066, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2003/066
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    References listed on IDEAS

    as
    1. Williamson, John, 1993. "Exchange Rate Management," Economic Journal, Royal Economic Society, vol. 103(416), pages 188-197, January.
    2. David Brodsky & Gary Sampson, 1984. "The sources of exchange rate instability in developing countries: Dollar, french Franc and SDR pegging countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 120(1), pages 133-154, March.
    3. Mr. S. E Oppers, 2000. "Dual Currency Boards: A Proposal for Currency Stability," IMF Working Papers 2000/199, International Monetary Fund.
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