Currency Union and Exchange Rate Issues

Currency Union and Exchange Rate Issues

Lessons for the Gulf States

New Horizons in Money and Finance series

Edited by Ronald MacDonald and Abdulrazak Al Faris

This book – written by leading academics and practitioners in the field – brings together cutting edge research on exchange rate regime and monetary union issues. There is a particular focus on the implications for member states of the Gulf Cooperation Council which is itself working towards forming a monetary union for the Gulf States.

Chapter 1: Introduction

Ronald MacDonald and Abdulrazak Al Faris

Subjects: economics and finance, financial economics and regulation, international economics, social policy and sociology, migration


Ronald MacDonald and Abdulrazak Al Faris ABOUT THIS BOOK The Gulf Cooperation Council (GCC) – the United Arab Emirates, the State of Bahrain, the Kingdom of Saudi Arabia, the Sultanate of Oman, the State of Qatar and the State of Kuwait – has as an objective the formation of a monetary union in 2010. This proposed monetary union raises clear issues in terms of the appropriateness of such a regime for these countries and whether, for example, the necessary institutional mechanisms are in place in the run up to the proposed union. Furthermore, in the run up to the monetary union most of the GCC countries have pegged their currencies rigidly to the US dollar, but the relatively dramatic movements in the US dollar in the recent past, and also in the early 1990s, have called this practice into question for a group of countries that predominantly rely on hydrocarbons as their primary export. This book brings together a selection of papers that focus on these important issues for the United Arab Emirates and other Gulf State countries. Specifically, the papers by Warren Coats, Zubair Iqbal, Mohsin Khan and Ronald MacDonald focus on exchange rate regime issues for either the UAE dirham or for the proposed GCC currency, while the primary focus of the papers by Abdulrazak Al Faris, Willem Buiter and Paul De Grauwe is on monetary union issues for the Gulf States. Abdulrazak Al Faris provides in Chapter 2 a historical perspective of the main developments in the GCC integration...