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The oil cycle, the Federal Reserve, and the monetary and exchange rate policies of Qatar

Author

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  • Khalid Rashid Alkhater
  • Syed Abul Basher

Abstract

Supporters of the Arab oil-exporting countries’ decades-long fixed exchange rate regime argue that since, oil is traded in US dollars, pegging to the dollar is optimal. However, the weakening relationship between oil prices and the US economy in terms of the Federal Reserve's expansionary monetary stance amid soaring oil prices for much of the previous decade has raised questions about the viability of the peg. Using Qatar as a case study, this paper empirically analyzes whether the synchronization pattern of business cycles has recently changed between Qatar and the USA. The results of the analysis show a pronounced desynchronization or decoupling of business cycles between Qatar and the USA during 2001–2010. Moreover, the dissimilarly of demand shocks between the two countries suggests that the imported monetary policy stance of the Federal Reserve has not been viable for Qatar in recent years. A natural implication of our findings is the need for a truly independent monetary policy oriented toward domestic goals.

Suggested Citation

  • Khalid Rashid Alkhater & Syed Abul Basher, 2016. "The oil cycle, the Federal Reserve, and the monetary and exchange rate policies of Qatar," Middle East Development Journal, Taylor & Francis Journals, vol. 8(1), pages 127-155, January.
    • Handle: RePEc:taf:rmdjxx:v:8:y:2016:i:1:p:127-155
    DOI: 10.1080/17938120.2016.1150010
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    Cited by:

    1. Taufeeque Ahmad Siddiqui & Haseen Ahmed & Mohammad Naushad & Uzma Khan, 2023. "The Relationship between Oil Prices and Exchange Rate: A Systematic Literature Review," International Journal of Energy Economics and Policy, Econjournals, vol. 13(3), pages 566-578, May.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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