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Working Paper Series - On the GCC Currency Union



On the GCC Currency Union


Volume : 0

No : 0

ISSN : WPS0910

Publisher : Arab Planning Institute - Kuwait

Author (s) : Weshah Razzak 

Published Date : 1/1/2009


Contents :
Essentially, the impact ofthe currency union on member countries depends on whether the common currencyarea is optimal in the sense that the effect of the asymmetric shocks is small,Mundell (1961). Typically, researchers use VAR of different types to analyzethe data. For robustness, we use different methodologies. First, we usedifferent estimators to estimate a small textbook model for the panel of theGulf Cooperation Council countries (GCC) from 1970 to 2006, where the short-runequilibrium real output and the real exchange rate are determined by theintersection of the assets and goods markets equilibrium schedules. And thecentral bank fixes the exchange rate by keeping the money supply at a levelwhere the domestic interest rate is equal to the foreign interest rate. Then wetest for symmetry using the nonparametric Triples test, Randles et al. (1980).Third, we introduce a nonparametric multivariate statistic to test whether thevariances of the shocks (the conditional variance) are equal across countries. 

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