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What are the Potential Economic Benefits of Enlarging the Gulf Cooperation Council?

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  • Saade Chami
  • Selim Elekdag
  • Ivan Tchakarov

Abstract

This paper uses a variant of the IMF's Global Economy Model (GEM) to estimate the macroeconomic benefits of Yemen's accession into the Gulf Cooperation Council (GCC). After calibrating the model to Yemen and the GCC block, several simulations are carried out to estimate the potential impact of economic integration on both regions. The paper draws two fundamental conclusions. First, regional integration enhances competition which produces large economic benefits for both Yemen and the GCC. In particular, we show that in some cases economic integration can increase GDP in Yemen by up to 14% and in the GCC by up to 7% over the long run. Second, even if market structures do not improve substantially, GCC enlargement can still generate substantial spillover gains in each block. More specifically, one measure of economic prosperity measured by consumption can increase by up to 7% in Yemen and up to 8% in the GCC.

Suggested Citation

  • Saade Chami & Selim Elekdag & Ivan Tchakarov, 2007. "What are the Potential Economic Benefits of Enlarging the Gulf Cooperation Council?," International Economic Journal, Taylor & Francis Journals, vol. 21(4), pages 521-548.
    • Handle: RePEc:taf:intecj:v:21:y:2007:i:4:p:521-548
    DOI: 10.1080/10168730701699059
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    References listed on IDEAS

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    1. Blomström, Magnus & Kokko, Ari, 1997. "Regional Integration and Foreign Direct Investment," CEPR Discussion Papers 1659, C.E.P.R. Discussion Papers.
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    4. Edison, Hali J. & Levine, Ross & Ricci, Luca & Slok, Torsten, 2002. "International financial integration and economic growth," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 749-776, November.
    5. Bayoumi, Tamim & Laxton, Douglas & Pesenti, Paolo, 2004. "Benefits and spillovers of greater competition in Europe: a macroeconomic assessment," Working Paper Series 341, European Central Bank.
    6. Blomstrom, Magnus & Kokko, Ari, 1997. "Regional integration and foreign direct investment : a conceptual framework and three cases," Policy Research Working Paper Series 1750, The World Bank.
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    Cited by:

    1. Burke, Edward, 2012. "One blood and one destiny? Yemen’s relations with the Gulf Cooperation Council," LSE Research Online Documents on Economics 55241, London School of Economics and Political Science, LSE Library.
    2. Takagi, Shinji, 2012. "Establishing Monetary Union in the Gulf Cooperation Council: What Lessons for Regional Cooperation?," ADBI Working Papers 390, Asian Development Bank Institute.

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