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Inflation Differentials in the GCC: Does the Oil Cycle Matter?
Author:
Mr. Oral Williams null

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Mr. Kamiar Mohaddes null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2011: Issue 294
Language:
English
Publication Date:
01 Dec 2011
DOI:
https://doi.org/10.5089/9781463927288.001
ISBN:
9781463927288
ISSN:
1018-5941
Pages:
30
Keywords:
WP; inflation differential; Inflation differentials; convergence; oil prices; panel data; pairwise approach; monetary union; Gulf Cooperation Council (GCC) countries.; credit growth differential; GCC inflation rates; weight differential; GCC country; Pairwise differential; differentials in the GCC; country inflation equation; oil revenue differential; inflation gap; government expenditure growth differential; rent weight differential; Inflation; Fiscal stance; Nominal effective exchange rate; Credit; Consumer price indexes; North Africa; Europe; Asia and Pacific
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper uses a pairwise approach to investigate the main factors that have been driving inflation differentials in the Gulf Cooperation Council (GCC) region for the past two decades. The results suggest that inflation differentials in the GCC are largely influenced by the oil cycle, mainly through the credit and fiscal channels. This implies that closer coordination of fiscal policies will be key for facilitating the closer integration of the GCC economies and ahead of the move to a monetary union. The results also indicate that after controlling for cyclical factors, convergence increased even during the recent oil boom.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund