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

Al-Busaidi Samir ()
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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

Review of Middle East Economics and Finance, 2013, vol. 9, issue 1, 1-36

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.

Keywords: Gulf Cooperation Council; optimal currency areas; structural VEC models (search for similar items in EconPapers)
JEL-codes: F15 F33 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1515/rmeef-2013-0023

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