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GCC Monetary Union and the Degree of Macroeconomic Policy Coordination

  • Bassem Kamar
  • Samy Ben Naceur

Coordinating macroeconomic policies is a pre-requisite to a successful launch of the common currency in the GCC countries. Relying on the Behavioral Equilibrium Exchange Rate approach as a theoretical framework, we apply the Pooled Mean Group methodology to determine the similarity of the impact of a selected set of macroeconomic indicators on the real exchange rate in each country. Our empirical evidence points to a clear coordination of monetary policy, fiscal policy, government consumption, and openness across the member countries. While RER misalignments also show a substantial convergence building over time, differences in the misalignments of the two polar cases remain rather substantial, calling for further coordination and policy harmonization.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/249.

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Length: 33
Date of creation: 01 Oct 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/249
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