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

ByBehrouz Guerami, S. Nuri Erbas, George T. Abed

April 1, 2003

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

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.

Subject: Conventional peg, Currencies, Exchange rate arrangements, Exchange rate flexibility, Exchange rates, Foreign exchange, Money

Keywords: basket peg, Conventional peg, Currencies, currency, dollar, dollar peg, euro, Europe, Exchange rate arrangements, Exchange rate flexibility, exchange rate pegging, Exchange rates, export, GCC country, GCC currency, GCC export, GCC monetary union, GCC trade account, oil export, WP

Pages:
25
Volume:
2003
DOI:
https://doi.org/10.5089/9781451848816.001
Issue:
066
Series:
Working Paper No. 2003/066
Stock No:
WPIEA0662003
ISBN:
9781451848816
ISSN:
1018-5941

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