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The GCC Monetary Union; Some Considerations for the Exchange Rate Regime

Author

Listed:
  • Behrouz Guerami
  • S. Nuri Erbas
  • George T. Abed

Abstract

We compare the dollar peg to a dollar-euro basket peg as alternative exchange rate regimes for the incipient Gulf Cooperation Council (GCC) currency union. Quantitative evidence suggests basket peg does not dominate dollar peg for improving external stability. However, as GCC exports and external financial assets become more diversified, a more flexible exchange policy may be necessary for competitiveness and stability. Pegging the prospective common GCC currency to a basket, like the dollar-euro basket, may provide a conservative transitional strategy toward a more flexible exchange rate policy.

Suggested Citation

  • Behrouz Guerami & S. Nuri Erbas & George T. Abed, 2003. "The GCC Monetary Union; Some Considerations for the Exchange Rate Regime," IMF Working Papers 03/66, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:03/66
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    References listed on IDEAS

    as
    1. Williamson, John, 1993. "Exchange Rate Management," Economic Journal, Royal Economic Society, vol. 103(416), pages 188-197, January.
    2. David Brodsky & Gary Sampson, 1984. "The sources of exchange rate instability in developing countries: Dollar, french Franc and SDR pegging countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 120(1), pages 133-154, March.
    3. S. E Oppers, 2000. "Dual Currency Boards; A Proposal for Currency Stability," IMF Working Papers 00/199, International Monetary Fund.
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    Citations

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    Cited by:

    1. Eisa A. Aleisa & Shawkat Hammoudeh & Yuan Yuan, 2008. "External and Regional Shocks in the GCC Region: Implications for a Common Exchange Rate Regime," Working Papers 426, Economic Research Forum, revised 06 Jan 2008.
    2. Magdaléna DRASTICHOVÁ, 2009. "Current and future monetary cooperation with a focus on the possible monetary union of Gulf Cooperation Council," Proceedings of FIKUSZ '09,in: László Áron Kóczy (ed.), Proceedings of FIKUSZ '09, pages 57-69 Óbuda University, Keleti Faculty of Business and Management.
    3. Weshah Razzak, "undated". "On the GCC Currency Union," API-Working Paper Series 0910, Arab Planning Institute - Kuwait, Information Center.
    4. M. Kabir Hassan & Ashraf Nakibullah, 2008. "Gulf Monetary Union and Regional Integration," Working Papers 453, Economic Research Forum, revised 09 Jan 2008.
    5. 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.
    6. 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.
    7. Ashraf Nakibullah, 2017. "The Effect of Fixed Exchange Rates on Monetary Policy of the GCC Countries," Applied Economics and Finance, Redfame publishing, vol. 4(2), pages 11-19, March.
    8. Davide Furceri & Georgios Karras, 2008. "Is the Middle East an Optimum Currency Area? A Comparison of Costs and Benefits," Open Economies Review, Springer, vol. 19(4), pages 479-491, September.
    9. Hebous, Shafik, 2006. "On the monetary union of the Gulf States," Kiel Advanced Studies Working Papers 431, Kiel Institute for the World Economy (IfW).
    10. Willem H. Buiter, 2010. "Economic, Political and Institutional Prerequisites for Monetary Union Among the Members of the Gulf Cooperation Council," Chapters,in: Currency Union and Exchange Rate Issues, chapter 3 Edward Elgar Publishing.
    11. John Hawkins & Paul Masson, 2003. "Economic aspects of regional currency areas and the use of foreign currencies," BIS Papers chapters,in: Bank for International Settlements (ed.), Regional currency areas and the use of foreign currencies, volume 17, pages 4-42 Bank for International Settlements.
    12. Abdelghani, Echchabi & Osman, Sayid & Isares, Mahamad & Khalid, Sorhiran & Zulhilmi, Zulkifli, 2011. "The implementation of Gulf Dinar among the GCC member countries and its possible impacts," MPRA Paper 28245, University Library of Munich, Germany.
    13. Habib, Maurizio Michael & Stráský, Jan, 2008. "Oil exporters: in search of an external anchor," Working Paper Series 958, European Central Bank.
    14. Marzovilla, Olga, 2010. "Impact of global economic imbalance on migrant workers and economies of the Gulf Cooperation Council," MPRA Paper 24210, University Library of Munich, Germany.
    15. Rosmy Jean Louis & Mohamed Osman & Faruk Balli, 2010. "Is the US Dollar a Suitable Anchor for the Newly Proposed GCC Currency?," The World Economy, Wiley Blackwell, vol. 33(12), pages 1898-1922, December.
    16. Jeffrey A. Frankel, 2017. "The Currency-Plus-Commodity Basket: A Proposal for Exchange Rates in Oil-exporting Countries to Accommodate Trade Shocks Automatically," Working Papers 1111, Economic Research Forum, revised 06 2017.
    17. Louis, Rosmy & Osman, Mohammad & Balli, FAruk, 2007. "On The Road to Monetary Union – Do Arab Gulf Cooperation Council Economies React in the same way to United States' Monetary Policy Shocks?," MPRA Paper 11610, University Library of Munich, Germany, revised Nov 2008.
    18. repec:wsi:medjxx:v:02:y:2010:i:02:n:s179381201000023x is not listed on IDEAS
    19. M. Kabir Hassan & Ashraf Nakibullah & Abul Hassan, 2013. "Sterilisation and Monetary Control by the GCC Member Countries," The World Economy, Wiley Blackwell, vol. 36(12), pages 1566-1587, December.
    20. Rafiq, M.S., 2011. "The optimality of a gulf currency union: Commonalities and idiosyncrasies," Economic Modelling, Elsevier, vol. 28(1-2), pages 728-740, January.
    21. Jay, Squalli, 2011. "Is the dollar peg suitable for the largest economies of the Gulf Cooperation Council?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(4), pages 496-512, October.
    22. Rafiq, M.S., 2011. "The optimality of a gulf currency union: Commonalities and idiosyncrasies," Economic Modelling, Elsevier, vol. 28(1), pages 728-740.

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