Impacts of global and domestic shocks on inflation and economic growth for actual and potential GCC member countries
By using a modern structural VAR with block exogeneity and identifying restrictions, this paper analyzes several global and regional oil and macroeconomic relationships related to the selected incumbent GCC member countries – Kuwait, Oman, Saudi Arabia – and the potential member Jordan. First, it examines the global macroeconomic linkages among the dollar exchange rate, oil price, China's producer price, U.S.'s export price, EU's export price and Japan's export price. Second, it investigates the effects of global and country-specific shocks on the industrial production and consumer price indices of these GCC member countries and the potential member Jordan. It thereby examines which individual global/local shocks command more importance in explaining the variations in the economic growth and inflation of each actual and potential GCC member. Third, it analyzes the similarities in economic growth and inflation among the GCC countries after controlling for different global and country-specific shocks. The results suggest that the overall CPI inflation rates of Kuwait, Oman, Saudi Arabia and Jordan are highly and positively correlated. The economic growth of Jordan shows negative correlations with those of the member countries. If the GCC members are to focus only on stabilizing inflation, there is no harm for them to accept Jordan as a new GCC member. However, if the GCC's objective is not only the stabilization of inflation but also the business cycle synchronization, the GCC members should be more cautious in accepting Jordan as a new member.
Volume (Year): 27 (2013)
Issue (Month): C ()
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/inca/620165|
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.:
- Rosmy Jean Louis & Faruk Balli & Mohamed Osman, 2012. "On the feasibility of monetary union among Gulf Cooperation Council (GCC) countries: does the symmetry of shocks extend to the non-oil sector?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 36(2), pages 319-334, April.
- Patrick Honohan & Philip R. Lane, 2003.
"Divergent inflation rates in EMU,"
CEPR;CES;MSH, vol. 18(37), pages 357-394, October.
- Philip R. Lane & Patrick Honohan, 2003. "Divergent Inflation Rates in EMU," Trinity Economics Papers 20034, Trinity College Dublin, Department of Economics.
- Philip R. Lane, & Patrick Honohan, 2003. "Divergent Inflation Rates in EMU," The Institute for International Integration Studies Discussion Paper Series iiisdp05, IIIS.
- Abu-Qarn, Aamer S. & Abu-Bader, Suleiman, 2007. "Sources of Growth Revisited: Evidence from Selected MENA Countries," World Development, Elsevier, vol. 35(5), pages 752-771, May.
- Magda Kandil & Hanan Morsy, 2011. "Determinants Of Inflation In Gcc," Middle East Development Journal (MEDJ), World Scientific Publishing Co. Pte. Ltd., vol. 3(02), pages 141-158.
- Magda E. Kandil & Hanan Morsy, 2009. "Determinants of Inflation in GCC," IMF Working Papers 09/82, International Monetary Fund.
- Lastrapes, William D., 2005. "Estimating and identifying vector autoregressions under diagonality and block exogeneity restrictions," Economics Letters, Elsevier, vol. 87(1), pages 75-81, April.
- Banik, Nilanjan & Biswas, Basudeb & Criddle, Keith R., 2009. "Optimum currency area in South Asia: A state space approach," International Review of Economics & Finance, Elsevier, vol. 18(3), pages 502-510, June.
- Agiomirgianakis, George & Zervoyianni, Athina, 2001. "Globalization of labor markets and macroeconomic equilibrium," International Review of Economics & Finance, Elsevier, vol. 10(2), pages 109-133.
- Syed Abul Basher & Elsayed Mousa Elsamadisy, 2012. "Country heterogeneity and long-run determinants of inflation in the Gulf Arab states," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 36(2), pages 170-203, 06.
- 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.
- Bhar, Ramaprasad & Hammoudeh, Shawkat, 2011. "Commodities and financial variables: Analyzing relationships in a changing regime environment," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 469-484, October.
- Lutz Kilian, 2009. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," American Economic Review, American Economic Association, vol. 99(3), pages 1053-1069, June.
- Kilian, Lutz, 2006. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," CEPR Discussion Papers 5994, C.E.P.R. Discussion Papers.
- Hebous, Shafik, 2006. "On the monetary union of the Gulf States," Kiel Advanced Studies Working Papers 431, Kiel Institute for the World Economy (IfW).
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
- Ali Darrat & Fatima Al-Shamsi, 2005. "On the path of integration in the Gulf region," Applied Economics, Taylor & Francis Journals, vol. 37(9), pages 1055-1062.
- Baldwin, John R. & Yan, Beiling, 2008. "Domestic and foreign influences on Canadian prices," International Review of Economics & Finance, Elsevier, vol. 17(4), pages 546-557, October.
- Stephen P.A. Brown & Keith R. Phillips, 1986. "Exchange rates and world oil prices," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Mar, pages 1-10.
- Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-276, March.
- Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107.
- Christian Bayer & Christoph Hanck, 2013. "Combining non-cointegration tests," Journal of Time Series Analysis, Wiley Blackwell, vol. 34(1), pages 83-95, 01.
- Bayer Christian & Hanck Christoph, 2009. "Combining Non-Cointegration Tests," Research Memorandum 012, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
- Hesham Alogeel & Maher Hasan, 2008. "Understanding the Inflationary Process in the GCC Region; The Case of Saudi Arabia and Kuwait," IMF Working Papers 08/193, International Monetary Fund.
- Gerlach-Kristen, Petra, 2009. "Business cycle and inflation synchronisation in Mainland China and Hong Kong," International Review of Economics & Finance, Elsevier, vol. 18(3), pages 404-418, June.
- Kamiar Mohaddes & Oral H. Williams, 2013. "Inflation Differentials In The Gcc: Does The Oil Cycle Matter?," Middle East Development Journal (MEDJ), World Scientific Publishing Co. Pte. Ltd., vol. 5(02), pages 1-23.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Nazlioglu, Saban & Soytas, Ugur, 2012. "Oil price, agricultural commodity prices, and the dollar: A panel cointegration and causality analysis," Energy Economics, Elsevier, vol. 34(4), pages 1098-1104.
- Won Joong Kim & Shawkat Hammoudeh & Eisa A. Aleisa, 2012. "SYNCHRONIZATION OF ECONOMIC SHOCKS BETWEEN GULF COOPERATION COUNCIL AND UNITED STATES, EUROPE, JAPAN, AND OIL MARKET: CHOICE OF EXCHANGE RATE REGIME-super-†," Contemporary Economic Policy, Western Economic Association International, vol. 30(4), pages 584-602, October.
- Pau Rabanal, 2009. "Inflation Differentials between Spain and the EMU: A DSGE Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(6), pages 1141-1166, 09. Full references (including those not matched with items on IDEAS)