This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

On The Road to Monetary Union – Do Arab Gulf Cooperation Council Economies React in the same way to United States' Monetary Policy Shocks?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Louis, Rosmy
Osman, Mohammad
Balli, FAruk

Additional information is available for the following registered author(s):

Abstract

This paper empirically estimates the responses of inflation and non-oil output growth from Arab Gulf Cooperation Council (AGCC) Countries to monetary policy shocks from the United States (US) in order to determine whether there is evidence to support the US dollar as the anchor for the proposed unified currency. For this, a structural vector autoregression identified with short-run restrictions was employed for each country with fund rate as US monetary policy instrument, non-oil output growth, and inflation. The main results that are of interest to decision makers suggest that (i) with respect to inflation, AGCC countries show synchronized responses to monetary policy shocks from the US and these responses are similar to US own inflation; (ii) with respect to non-oil output growth, there is no clear indication that US monetary policy can do as good of a job for AGCC countries as it has done at home. Therefore, importing monetary policy from the United States via a dollar peg may guarantee stable inflation for AGCC countries but not necessarily stable non-oil output growth. To the extent that the non-oil output response is taken seriously and there are concerns over the dollar's ability to perform its role as a store of value, a basket peg with both the US dollar and the Euro may be a sound alternative as confirmed by the variance decomposition analysis of our augmented SVAR with a proxy for the European short-term interest rate.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://mpra.ub.uni-muenchen.de/11610/
File Format:
File Function:
Download Restriction: no

Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11610.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Dec 2007
Date of revision: Nov 2008
Handle: RePEc:pra:mprapa:11610

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Ekkehart Schlicht).

Related research
Keywords: AGCC Countries; US monetary policy shock; monetary union; currency peg; SVARs;

Other versions of this item:

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
F15 - International Economics - - Trade - - - Economic Integration
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January. [Downloadable!] (restricted)
  2. Belkacem Laabas and Imed Limam, . "Are GCC Countries Ready for Currency Union?," API-Working Paper Series 0203, Arab Planning Institute - Kuwait, Information Center. [Downloadable!]
  3. Cooley, Thomas F. & Leroy, Stephen F., 1985. "Atheoretical macroeconometrics: A critique," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 283-308, November. [Downloadable!] (restricted)
  4. Michael Sturm & Nikolaus Siegfried, 2005. "Regional monetary integration in the member states of the Gulf Cooperation Council," Occasional Paper Series 31, European Central Bank. [Downloadable!]
  5. Horvath, Julius & Ratfai, Attila, 2004. "Supply and demand shocks in accession countries to the Economic and Monetary Union," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 202-211, June. [Downloadable!] (restricted)
  6. Giordani, Paolo, 2004. "An alternative explanation of the price puzzle," Journal of Monetary Economics, Elsevier, vol. 51(6), pages 1271-1296, September. [Downloadable!] (restricted)
    Other versions:
  7. Sims, Christopher A., 1992. "Interpreting the macroeconomic time series facts : The effects of monetary policy," European Economic Review, Elsevier, vol. 36(5), pages 975-1000, June. [Downloadable!] (restricted)
    Other versions:
  8. Ugo Fasano-Filho & Andrea Schaechter, 2003. "Monetary Union Among Member Countries of the Gulf Cooperation Council," IMF Occasional Papers 223, International Monetary Fund.
  9. S. Nuri Erbas & Behrouz Guerami & George T. Abed, 2003. "The GCC Monetary Union: Some Considerations for the Exchange Rate Regime," IMF Working Papers 03/66, International Monetary Fund. [Downloadable!]
  10. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec.. [Downloadable!] (restricted)
    Other versions:
  11. Esteban Jadresic, 2002. "On a Common Currency for the GCC Countries," IMF Policy Discussion Papers 02/12, International Monetary Fund.
  12. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148 Elsevier. [Downloadable!] (restricted)
    Other versions:
  13. Eric M. Leeper & Jennifer E. Roush, 2003. "Putting 'M' back into Monetary Policy," NBER Working Papers 9552, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
Full references

Statistics
Access and download statistics

Did you know? There are over 21000 authors registered on RePEc Author Service.

This page was last updated on 2009-12-10.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.