GCC Monetary Union and the Degree of Macroeconomic Policy Coordination
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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. 2007/249
Subject:
Capital flows Currencies Exchange rates Monetary base Real exchange rates
English
Publication Date:
October 1, 2007
ISBN/ISSN:
9781451868128/1018-5941
Stock No:
WPIEA2007249
Pages:
33
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