Description

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.

Taxonomy

Cooperation Council for the Arab States of the Gulf , Economic cooperation , Foreign exchange , International organizations

More publications in this series: Working Papers

More publications by: Behrouz Guerami ; S Nuri Erbas ; George T Abed