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

30 Pages Posted: 20 Dec 2011

See all articles by Kamiar Mohaddes

Kamiar Mohaddes

University of Cambridge - Judge Business School; University of Cambridge - King's College, Cambridge

Oral H. Williams

International Monetary Fund (IMF)

Date Written: December 2011

Abstract

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.

Suggested Citation

Mohaddes, Kamiar and Williams, Oral H., Inflation Differentials in the GCC: Does the Oil Cycle Matter? (December 2011). IMF Working Paper No. 11/294, Available at SSRN: https://ssrn.com/abstract=1974846

Kamiar Mohaddes (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 (0)1223 766933 (Phone)

HOME PAGE: http://https://www.mohaddes.org/

University of Cambridge - King's College, Cambridge ( email )

King's Parade
Cambridge, CB2 1ST
United Kingdom
+44 (0)1223 766933 (Phone)

HOME PAGE: http://https://www.mohaddes.org/

Oral H. Williams

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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