On the Optimality of a GCC Monetary Union: Structural VAR, Common Trends and Common Cycles Evidence

Abu-Bader, Suleiman () and Aamer Abu-Qarn ()
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Abu-Bader, Suleiman: Department of Economics, Ben-Gurion University of the Negev

No 225, Working Papers from Ben-Gurion University of the Negev, Department of Economics

Abstract: This paper examines the suitability of the proposed monetary union among the members of the Gulf Cooperation Council (GCC). To do so, we identify the underlying structural shocks that these economies are subject to and assess the extent to which the shocks are symmetric. Additionally, we test for common trends and common business cycles among the GCC economies. We find that while the transitory demand shocks areare typically symmetric, the permanent supply shocks are asymmetric. Furthermore, we do not find synchronous long-run and short-rum movements in output. Despite the progress that has been made in terms of integration, our findings indicate thet the conditions for forming a GCC monetary union have not as yet been met.

Keywords: Gulf Cooperation Council; GCC; optimal monetary union; cointegration; common cycles; structural VAR (search for similar items in EconPapers)
JEL-codes: F33 F36 (search for similar items in EconPapers)
Date: Written 2006-09
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http://www.econ.bgu.ac.il/papers/225.pdf First version, 2006 (application/pdf)

Related works:
Working Paper: On the optimality of a GCC Monetary Union: Structural VAR, Common Trends and Common Cycles Evidence (2006)
Journal Article: On the Optimality of a GCC Monetary Union: Structural VAR, Common Trends, and Common Cycles Evidence (2008)
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