Description

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.

Taxonomy

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

More publications in this series: Working Papers

More publications by: Bassem Kamar ; Samy Ben Naceur