Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108697
Authors: 
Termos, Ali
Genc, Ismail H.
Naufal, George S
Year of Publication: 
2015
Series/Report no.: 
IZA Discussion Papers 8810
Abstract: 
The strong economic ties between the GCC economies and the U.S. are manifested in three ways: currency peg, coupling of monetary policy, and the adoption of the U.S. dollar as the trading currency for oil. This paper examines how these dynamics result in a misalignment of the U.S. monetary policy with the business cycles of the GCC economies. The study shows how the staggering amount of remittances outflow of the GCC economies plays a stabilizing role as a tacit monetary policy tool. Incorporating remittances in the money demand equation results in a more robust model than otherwise. We further find that the effect of the Federal Funds rate on money demand in these countries diminishes in significance during the period of oil boom between 2002 and 2009. However, the transmission effect of the recession periods in the U.S. into the demand for money in the GCC countries is not statistically significant.
Subjects: 
remittances
inflation
monetary policy
GCC
JEL: 
F24
N15
Document Type: 
Working Paper

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