Band 9, Heft 1 -

This article investigates the viability of a common currency for the Gulf Cooperation Council (GCC) countries. A structural vector autoregressive modelling framework is employed to model and compare economically meaningful shocks affecting the GCC members from 1980 to 2004. The results show that output responses to oil price and monetary policy shocks are heterogeneous for the GCC members. Suggested policy implications are that the GCC economies are unlikely to require similar monetary policy adjustments, and the costs of monetary unification will increase as Bahrain and Oman’s oil resources are depleted.

In this paper, we estimate a Phillips Curve model for Iran in which expectations of inflation are formed both adaptively and rationally. We measure a significant trade-off between inflation and unemployment. Our results suggest that reaching the five-year plan’s “target” unemployment rate of 7% will accelerate the inflation rate to more than 30%. Likewise, arriving at the plan’s “target” inflation rate of 12% will increase the unemployment rate to about 18%. Given such a trade-off, the plan’s target of achieving lower unemployment rate and slower inflation rate is not feasible. In the oil-based economy of Iran, where the public sector through spending of oil export revenues is the main driver of growth, management of the output gap related to the effect of the aggregate demand on inflation helps ease the unemployment–inflation trade-off in an attempt to create jobs with minimal inflationary pressure. In this context, the key for Iran’s economic stability is a sustained expansion of the productive capacity to create meaningful jobs for its growing labor force and to boost the supply of consumer and capital goods to alleviate inflationary pressures.

With the aim of diversifying the country’s economic base and reducing the heavy dependence on the oil sector, the Saudi government established a number of Specialized Credit institutions (SCIs) in order to facilitate the expansion of the private sector’s role in the national economy. Thus, the main objective of this paper is to empirically examine the relationship between government credit provided to the private sector and the rate of private domestic investment in Saudi Arabia. We apply cointegration and Vector Error Correction Model (VECM) methodology and use data over the period 1968–2010. We find that private domestic investment is positively associated with credit provided by the government Specialized Credit Institutions. Yet we find that banking credit provided to the private sector has the largest impacts.

: This article constitutes an enrichment of Frenkel and Rose (1998) approach. We seek to develop a coherent framework for this type of empirical study by considering a broader range of international symmetry transmission channels. Our attempt is to get a better characterization of the forces underlying the synchronization of the Middle Eastern and North African economies. The following transmission mechanisms are considered: Economic integration (inter- and intra-industry trade); Productive structure similarity; and economic policies coordination. Panel estimations with introduction of instrumental variables and the use of Generalized Method of Moments have been applied. We try to compare the dynamics of three integration types, the North–North (G7 vs G7), North–South (G7 vs MENA), and the South–South (MENA vs MENA). The purpose is to see how the impact of trade integration on the international co-movement differs from one type of integration to another. In every case, we try to evaluate the role that can be played by each of the various channels, and compare the results with the observed facts for the developed countries as well as with theory predictions. We find that the intra-industry trade and the productive structure similarity lead to more business cycle convergence. More trade integration, and precisely, the inter-industry one, does not necessarily lead to more business cycles synchronization.