IDEAS home Printed from https://ideas.repec.org/a/wsi/medjxx/v04y2012i01ns1793812012500010.html
   My bibliography  Save this article

Is The Announced Monetary Union In Gcc Countries Feasible? A Multivariate Structural Var Approach

Author

Listed:
  • MAGDA KANDIL

    () (Egyptian Center for Economic Studies, Egypt)

  • MOHAMED TRABELSI

    () (Dubai Economic Policy and Research Center, U.A.E.)

Abstract

This paper tests the desirability and feasibility of the establishment of a monetary union in GCC countries using a multivariate structural VAR during the period 1980–2006. The paper builds on the earlier work, capitalizing on a methodology that captures supply and demand disturbances impinging on individual economies. Co-movements of shocks across countries are considered a crucial condition towards integration in a common currency area. Shocks are based on the estimation of a structural VAR model that comprises world real output, domestic output, real exchange rates, and the price level. Based on correlations using supply, demand, and nominal shocks, the paper establishes the following results: (i) countries of the region are still far from the necessary conditions to ensure the success of joining a currency union. Nevertheless, for a subset of countries (Saudi Arabia, the United Arab Emirates, and Qatar), conditions suggest higher potential to take the lead in endorsing and fostering a common currency zone, (ii) a higher degree of labor mobility, openness, and intra-regional mobility are still desired to accelerate regional integration and ensure a steady path towards the establishment of a currency union.

Suggested Citation

  • Magda Kandil & Mohamed Trabelsi, 2012. "Is The Announced Monetary Union In Gcc Countries Feasible? A Multivariate Structural Var Approach," Middle East Development Journal (MEDJ), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-18.
  • Handle: RePEc:wsi:medjxx:v:04:y:2012:i:01:n:s1793812012500010
    DOI: 10.1142/S1793812012500010
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S1793812012500010
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    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. Michael Sturm & Nikolaus Siegfried, 2005. "Regional monetary integration in the member states of the Gulf Cooperation Council," Occasional Paper Series 31, European Central Bank.
    3. Sturm, Michael & Siegfried, Nikolaus, 2005. "Regional monetary integration in the member states of the Gulf Cooperation Council," Occasional Paper Series 31, European Central Bank.
    4. Kwan, C. H., 1998. "The theory of optimum currency areas and the possibility of forming a yen bloc in Asia," Journal of Asian Economics, Elsevier, vol. 9(4), pages 555-580.
    5. Belkacem Laabas and Imed Limam, "undated". "Are GCC Countries Ready for Currency Union?," API-Working Paper Series 0203, Arab Planning Institute - Kuwait, Information Center.
    6. Louis, Rosmy & Balli, Faruk & Osman, Mohammad, 2008. "Monetary Union Among Arab Gulf Cooperation Council (AGCC) Countries: Does the symmetry of shocks extend to the non-oil sector?," MPRA Paper 11611, University Library of Munich, Germany.
    7. Aamer S. Abu-Qarn & Suleiman Abu-Bader, 2008. "On the Optimality of a GCC Monetary Union: Structural VAR, Common Trends, and Common Cycles Evidence," The World Economy, Wiley Blackwell, vol. 31(5), pages 612-630, May.
    8. Pattanaik, Sitikantha, 2007. "How Closely the GCC Approximates an Optimum Currency Area?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 22, pages 573-597.
    9. Bassem M Kamar & Samy Ben Naceur, 2007. "GCC Monetary Union and the Degree of Macroeconomic Policy Coordination," IMF Working Papers 07/249, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jongwanich, Juthathip & Wongcharoen, Petchtharin & Park, Donghyun, 2016. "Determinants of Consumer Price Inflation versus Producer Price Inflation in Asia," ADB Economics Working Paper Series 491, Asian Development Bank.
    2. repec:bla:worlde:v:40:y:2017:i:10:p:2153-2171 is not listed on IDEAS

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:medjxx:v:04:y:2012:i:01:n:s1793812012500010. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim). General contact details of provider: http://www.worldscinet.com/medj/medj.shtml .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.