The GCC Monetary Union: Some Considerations for the Exchange Rate Regime

25 Pages Posted: 28 Jan 2006

See all articles by George T. Abed

George T. Abed

International Monetary Fund (IMF) - Fiscal Affairs Department

S. Nuri Erbas

International Monetary Fund (IMF) - Middle East and Central Asia Department

Behrouz Guerami

International Monetary Fund (IMF)

Date Written: April 2003

Abstract

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.

Keywords: exchange rate pegging, dollar peg, basket peg

JEL Classification: F15, F31, F42

Suggested Citation

Abed, George T. and Erbas, S. Nuri and Guerami, Behrouz, The GCC Monetary Union: Some Considerations for the Exchange Rate Regime (April 2003). IMF Working Paper No. 03/66, Available at SSRN: https://ssrn.com/abstract=879141

George T. Abed (Contact Author)

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

S. Nuri Erbas

International Monetary Fund (IMF) - Middle East and Central Asia Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Behrouz Guerami

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States