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What Drives Inflation in Gulf Cooperation Council (GCC) Countries

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  • Majed Alharthi

Abstract

The main reason of this study is to determine the main inflation determinants in Gulf Cooperation Council (GCC) countries over the period 1996-2016. The GCC area is exposing many economic challenges and risks like higher prices of basic products and services. Moreover, GCC countries impose value added tax in 2018 that increased the prices significantly. To reduce the prices rates, GCC governments decided to support the local manufacturing rather than depending on imports. However, controlling the inflation rates is showing the efficiency of economic administration for any country. In this study, the data was gathered through the United Nations Conference on Trade and Development (UNCTAD) International Monetary Fund (IMF) and World Bank (WB) databases. Statistically, the data were analysed by generalized method of moments (GMM) and generalized least square (GLS). The main results of this study show that the foreign direct investment (FDI) is one of main determinants that has an inverse and significant influence on inflation. Moreover, the corruption impacted the inflation positively and significantly. Finally, the oil prices are controlling the inflation as higher oil prices increase the inflation rates significantly.

Suggested Citation

  • Majed Alharthi, 2020. "What Drives Inflation in Gulf Cooperation Council (GCC) Countries," Business and Economic Research, Macrothink Institute, vol. 10(1), pages 133-141, March.
    • Handle: RePEc:mth:ber888:v:10:y:2020:i:1:p:133-141
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    References listed on IDEAS

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    1. Bhattacharya, Rina, 2014. "Inflation dynamics and monetary policy transmission in Vietnam and emerging Asia," Journal of Asian Economics, Elsevier, vol. 34(C), pages 16-26.
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    More about this item

    Keywords

    Inflation; Gulf Cooperation Council countries; Arab Spring; Oil prices;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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