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Modelling Macroeconomic Shocks in the GCC: Is Monetary Unification Viable?

Author

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  • Al-Busaidi Samir

    (College of Economics and Political Science, Sultan Qaboos University, PO Box 20, Postal Code 123, Al-Khodh, Oman)

Abstract

This article investigates the viability of a common currency for the Gulf Cooperation Council (GCC) countries. A structural vector autoregressive modelling framework is employed to model and compare economically meaningful shocks affecting the GCC members from 1980 to 2004. The results show that output responses to oil price and monetary policy shocks are heterogeneous for the GCC members. Suggested policy implications are that the GCC economies are unlikely to require similar monetary policy adjustments, and the costs of monetary unification will increase as Bahrain and Oman’s oil resources are depleted.

Suggested Citation

  • Al-Busaidi Samir, 2013. "Modelling Macroeconomic Shocks in the GCC: Is Monetary Unification Viable?," Review of Middle East Economics and Finance, De Gruyter, vol. 9(1), pages 1-36.
    • Handle: RePEc:bpj:rmeecf:v:9:y:2013:i:1:p:1-36:n:1004
    DOI: 10.1515/rmeef-2013-0023
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    More about this item

    Keywords

    Gulf Cooperation Council; optimal currency areas; structural VEC models;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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