IMF Working Papers

Inflation Differentials in the GCC: Does the Oil Cycle Matter?

By Oral Williams, Kamiar Mohaddes

December 1, 2011

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Oral Williams, and Kamiar Mohaddes. Inflation Differentials in the GCC: Does the Oil Cycle Matter?, (USA: International Monetary Fund, 2011) accessed October 9, 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

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 closer coordination of fiscal policies will be key for facilitating the closer integration of the GCC economies and ahead of the move to a monetary union. The results also indicate that after controlling for cyclical factors, convergence increased even during the recent oil boom.

Subject: Consumer price indexes, Credit, Fiscal policy, Fiscal stance, Foreign exchange, Inflation, Money, Nominal effective exchange rate, Prices

Keywords: Asia and Pacific, Consumer price indexes, Convergence, Country inflation equation, Credit, Credit growth differential, Differentials in the GCC, Europe, Fiscal stance, GCC country, GCC inflation rates, Government expenditure growth differential, Gulf Cooperation Council (GCC) countries., Inflation, Inflation differential, Inflation differentials, Inflation gap, Monetary union, Nominal effective exchange rate, North Africa, Oil prices, Oil revenue differential, Pairwise approach, Pairwise differential, Panel data, Rent weight differential, Weight differential, WP

Publication Details

  • Pages:

    30

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2011/294

  • Stock No:

    WPIEA2011294

  • ISBN:

    9781463927288

  • ISSN:

    1018-5941