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On the Optimality of GCC Monetary Union: Asymmetric Shocks Assessments

Author

Listed:
  • Atef Saad Alshehry

    (College of Administrative Sciences, Najaran University, Saudia Arabia)

  • Sarra Ben Slimane

    (College of Administrative Sciences, Najaran University, Saudia Arabia)

Abstract

The main objective of this paper is to investigate the desirability and the feasibility of establishing a monetary union in GCC countries. The paper assesses the symmetry of the external shocks that the economies are subject to and the degree of synchronization in long run economic activities and in short run business cycle. The paper establishes the following results: (i) In general correlation results of the various shocks indicate that GCC countries are still far forming an optimal currency union given the fact that a large number of correlation¡¯s coefficients are not positive meaning that shocks are asymmetric; (ii) However, decomposition variance results argue well for feasibility of currency union across GCC countries.

Suggested Citation

  • Atef Saad Alshehry & Sarra Ben Slimane, 2013. "On the Optimality of GCC Monetary Union: Asymmetric Shocks Assessments," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 49-62, February.
    • Handle: RePEc:bap:journl:130105
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    References listed on IDEAS

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    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. Sturm, Michael & Siegfried, Nikolaus, 2005. "Regional monetary integration in the member states of the Gulf Cooperation Council," Occasional Paper Series 31, European Central Bank.
    3. Belkacem Laabas and Imed Limam, "undated". "Are GCC Countries Ready for Currency Union?," API-Working Paper Series 0203, Arab Planning Institute - Kuwait, Information Center.
    4. Junichi Goto & Koichi Hamada, 1994. "Economic Preconditions for Asian Regional Integration," NBER Chapters, in: Macroeconomic Linkage: Savings, Exchange Rates, and Capital Flows, pages 359-388, National Bureau of Economic Research, Inc.
    5. Zaidi, Iqbal, 1990. "Monetary coordination among the gulf cooperation council countries," World Development, Elsevier, vol. 18(5), pages 759-768, May.
    6. Michael Sturm & Nikolaus Siegfried, 2005. "Regional monetary integration in the member states of the Gulf Cooperation Council," Occasional Paper Series 31, European Central Bank.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Monetary Union; GCC countries; convergence criteria; Structural VAR model; Asymmetric shocks;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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