GCC Monetary Union and the Degree of Macroeconomic Policy Coordination

October 1, 2007

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Format: Chicago

Bassem M Kamar, and Sami Ben Naceur. GCC Monetary Union and the Degree of Macroeconomic Policy Coordination, (USA: International Monetary Fund, 2007) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Coordinating macroeconomic policies is a pre-requisite to a successful launch of the common currency in the GCC countries. Relying on the Behavioral Equilibrium Exchange Rate approach as a theoretical framework, we apply the Pooled Mean Group methodology to determine the similarity of the impact of a selected set of macroeconomic indicators on the real exchange rate in each country. Our empirical evidence points to a clear coordination of monetary policy, fiscal policy, government consumption, and openness across the member countries. While RER misalignments also show a substantial convergence building over time, differences in the misalignments of the two polar cases remain rather substantial, calling for further coordination and policy harmonization.

Subject: Capital flows, Currencies, Exchange rates, Monetary base, Real exchange rates

Keywords: Common currency, Monetary policy, WP

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2007/249
Stock No:

WPIEA2007249
ISBN:

9781451868128
ISSN:

1018-5941

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