Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/142565 
Year of Publication: 
2010
Series/Report no.: 
EERI Research Paper Series No. 03/2010
Publisher: 
Economics and Econometrics Research Institute (EERI), Brussels
Abstract: 
The Gulf Cooperation Council countries (GCC) include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. Their monetary policy objective is to stabilize the foreign price, i.e., exchange rate instead of the domestic price level, where the nominal interest rate is equalized with the US federal fund rate, but the inflation rates are independent. High oil prices and the depreciating US dollar caused inflation to rise and real interest rates to be persistently negative in the UAE and Qatar. Asset prices bubbles formed then burst creating large loses. They could have moderated the effect of, or avoided, the bubble had they floated the currency and stabilized domestic prices.
Subjects: 
Inflation
real interest rate
bubbles
JEL: 
E31
E37
E58
Document Type: 
Working Paper

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