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Regional Initiative in the Gulf Arab States: The Search for a Common Currency

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  • Syed Abul, Basher

Abstract

While many commentators have been openly critical of China's currency policy on the basis of an undervalued renminbi, despite a similar surge in GCC's (Gulf Cooperation Council) balance of payment surpluses in the first decade of this century, the vast majority of the commentators have maintained a stony silence on the undervalued Gulf currencies. This underscores the geopolitics of currencies as a form of asymmetric warfare and the consequences of dollar, euro or renminbi diplomacy. This paper makes two main additions to the literature on Gulf monetary union. First, it emphasizes that the creation of a fiscal union is necessary for the Gulf monetary union to succeed. Second, it proposes some alternatives to pegging to the dollar, which would allow the GCC to absorb large swings in global commodity prices (oil, food) in the short to medium run. The proposed exchange rate regimes are not conditional on the formation of the Gulf monetary union, and can be implemented individually or collectively.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46486.

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Date of creation: 23 Apr 2013
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Handle: RePEc:pra:mprapa:46486

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Keywords: Fixed exchange rate; Currency basket; Fiscal union; Monetary union; Gulf Cooperation Council.;

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  1. Basher, Syed Abul & Elsamadisy, Elsayed Mousa, 2010. "Country Heterogeneity and Long-Run Determinants of Inflation in the Gulf Arab States," MPRA Paper 27348, University Library of Munich, Germany.
  2. Mohsin S. Khan, 2009. "The GCC Monetary Union: Choice of Exchange Rate Regime," Working Paper Series, Peterson Institute for International Economics WP09-1, Peterson Institute for International Economics.
  3. Serhan Cevik, 2011. "Policy Coordination in Fiscal Federalism," IMF Working Papers 11/147, International Monetary Fund.
  4. Michael D. Bordo & Agnieszka Markiewicz & Lars Jonung, 2011. "A Fiscal Union for the Euro: Some Lessons from History," NBER Working Papers 17380, National Bureau of Economic Research, Inc.
  5. Frankel, Jeffrey A., 2005. "Peg the export price index: A proposed monetary regime for small countries," Journal of Policy Modeling, Elsevier, vol. 27(4), pages 495-508, June.
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