The GCC Monetary Union: Some Considerations for the Exchange Rate Regime

Behrouz Guerami, S. Erbas and George Abed

No 2003/066, IMF Working Papers from International Monetary Fund

Abstract: We compare the dollar peg to a dollar-euro basket peg as alternative exchange rate regimes for the incipient Gulf Cooperation Council (GCC) currency union. Quantitative evidence suggests basket peg does not dominate dollar peg for improving external stability. However, as GCC exports and external financial assets become more diversified, a more flexible exchange policy may be necessary for competitiveness and stability. Pegging the prospective common GCC currency to a basket, like the dollar-euro basket, may provide a conservative transitional strategy toward a more flexible exchange rate policy.

Keywords: WP; dollar; export; currency; euro; exchange rate pegging; dollar peg; basket peg; GCC currency; GCC country; GCC export; GCC monetary union; GCC trade account; oil export; Conventional peg; Exchange rates; Exchange rate arrangements; Currencies; Exchange rate flexibility; Europe (search for similar items in EconPapers)
Pages: 25
Date: 2003-04-01
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Citations: View citations in EconPapers (39)

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