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

Author/Editor:

Oral Williams ; Kamiar Mohaddes

Publication Date:

December 1, 2011

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:

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.

Series:

Working Paper No. 11/294

Subject:

English

Publication Date:

December 1, 2011

ISBN/ISSN:

9781463927288/1018-5941

Stock No:

WPIEA2011294

Format:

Paper

Pages:

30

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