GCC Monetary Union and the Degree of Macroeconomic Policy Coordination

Author/Editor:

Bassem M Kamar ; Samy Ben Naceur

Publication Date:

October 1, 2007

Electronic Access:

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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.

Series:

Working Paper No. 07/249

Subject:

English

Publication Date:

October 1, 2007

ISBN/ISSN:

9781451868128/1018-5941

Stock No:

WPIEA2007249

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

33

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