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INFLATION DIFFERENTIALS IN THE GCC: DOES THE OIL CYCLE MATTER?

Kamiar Mohaddes () and Oral Williams

Middle East Development Journal (MEDJ), 2013, vol. 05, issue 02, 1-23

Abstract: This paper uses a pairwise approach to investigate the main factors that have been driving inflation differentials in the Gulf Cooperation Council (GCC) region for the past two decades. The results suggest that inflation differentials in the GCC are largely influenced by the oil cycle, mainly through the credit and fiscal channels. This implies that in order for the proposed monetary union to be successful, closer coordination of fiscal policies will be critical. The results also indicate that after controlling for cyclical factors, convergence increased even during the recent oil boom.

Keywords: Inflation differentials; convergence; oil prices; panel data; pairwise approach; monetary union; Gulf Cooperation Council (GCC) countries (search for similar items in EconPapers)
Date: 2013
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Working Paper: Inflation Differentials in the GCC; Does the Oil Cycle Matter? (2011) Downloads
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DOI: 10.1142/S1793812013500120

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