a unified GCC currency 14 2.3 Exchange rate regime and currency peg 18 2.4 Concerns in establishing a common currency 19 2.5 The issue of optimality in the unified currency area 22 2.6 Synthesis 24 Chapter 3 Research Methodology 25 3.1 Research strategy 25 3.2 Research variables 26 3.3 Data gathering methodology 29 3.4 Method of data analysis 30 Chapter 4 Data 31 4.1 Gross Domestic Product (GDP) 31 4.2 Per Capita Income (PCY) 33 4.2 Inflation (INF) 35 4.4 Current Account Balance (CAB) 37 4.5 Exports (EXP) 39 4.6 Imports (IMP) 43 4.7 Total Reserves (TOTR) 45 4.8 Real Effective Exchange Rate (REER) 46 4.9 Population 48 4.10 Summary of correlation results 49 Chapter 5 Discussion 51 Chapter 6 Summary and conclusion 58 Bibliography 60 List of Tables Table 1: GDP descriptive statistics 31 Table 2: GDP proximity matrix 32 Table 3: PCY descriptive statistics 34 Table 4: PCY proximity matrix 34 Table 5: INF descriptive statistics 35 Table 6: INF proximity matrix 36 Table 7: CAB descriptive statistics 38 Table 8: CAB proximity matrix 38 Table 9: EXP descriptive statistics 40 Table 10: EXP proximity matrix 41 Table 11: IMP descriptive statistics 43 Table 12: IMP proximity matrix 43 Table 13: TOTR descriptive statistics 45 Table 14: TOTR proximity matrix 45 Table 15: REER descriptive statistics 46 Table 16: REER proximity matrix 47 Table 17: POP descriptive statistics 48 Table 18: POP proximity matrix 48 Table 19: Summary of correlation results 50 Table 20: Integration objectives in 1982 and 2001 55 List of Figures Figure 1: GDP comparative data 33 Figure 2: PCY comparative data 35 Figure 3: INF comparative data 37 Figure 4: CAB comparative data 39 Figure 5-1: EXP1 – Export volume percentage changes for all 4 GCC states 41 Figure 5-2: EXP1 – Export volume percentage changes...
The creation of a currency union is centred upon the formulation of a new currency that will be adopted as legal tender for all the member countries that form the union. The process is complex and delicate, since it necessitates the absorption of the national currencies into one, and with this the unification of monetary policy for the union (Krueger, Kamar & Carlotti, 2009). National economic and monetary policy are necessarily implicated, such that the individual states give up to an extent their sovereign right to policy determination insofar as they are constrained by the union.
This study examines the dynamics involved in assessing the viability of a monetary union in the Gulf Cooperation Council (GCC) region. Out of the six countries in the region, only four have opted into the prospective union, which right away underscores the difficulties in both the processes and effects involved in the union’s establishment.
1.1 Background of the research problem
In 2002, the euro was adopted as the first single currency of any unified monetary region worldwide. The euro was established by provision of the Maastricht Treaty in 1992. It is not commonly known, however, that some eleven years before this treaty, in 1981 the Gulf Cooperation Council formally articulated its objective to seek to establish a single, unified currency for the six member states in this region. Originally scheduled for adoption in 2010, the adoption date was postponed because of the destabilization caused by the intervening financial crisis and the economic recession.