GCC Currency Union: Necessary Precursors and Prospects

Rutledge, Emilie (2014). GCC Currency Union: Necessary Precursors and Prospects. GRC Gulf Papers; Gulf Research Center, Cambridge.

URL: https://www.grc.net/search-publications?name=gcc+c...

Abstract

The purpose of this report is to set out the steps that members of the GCC would need to take in order to effectively implement their long planned currency union. While the preparatory measures themselves are likely to constitute some of the key economic benefits, Optimal Currency Areas (OCA) will only manifest within a single market in which labor and capital are mobile and in which banking operations and fiscal budgetary decisions are accountable, transparent, and subject to intra-regional institutional regulation and oversight. Thus, in taking steps toward a currency union (CU), participating members would first need to establish a single market and devolve, when required, some executive decision making powers in relation to monetary and macroeconomic matters. By doing so, they would create a larger and deeper market that would be considerably more attractive to domestic and foreign investors alike. However, if member states do achieve such precursors and form a “single” currency as opposed to a “common” one which, give or take, they effectively have with their extant relationships with the US dollar – the driving force will have been political, not economic, incentives.

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