Modelling the Economic and Political Factors of Optimum Currency Area Theory for the Adoption of the Single Currency Project in Gulf Cooperation Council

The Gulf Cooperation Council (GCC) is an organisation that has for a long time had a regional policy to create an economic as well as a political bloc. The theory of optimum currency areas provides the economic foundation for this research. Previous studies focused largely on the eight prerequisites of an optimum currency area. Political events in the Gulf region for the decade up to 2016 have underscored the importance of political factors in delaying the commencement of a single currency area in the GGC member nations. Therefore, this research looks at the political and historic factors affecting greater economic integration. To achieve a better understanding of the economic and political context and relationships the research uses a mixed research methodology. The qualitative research aspect uses an interview instrument for data collection, with content analysis as the technique for data analysis. The quantitative research segment relies on secondary data from the GCC and international financial agencies, and tests for cointegration. Cointegration tests are an econometric technique, which allows the testing of hypotheses, and the cointegration of economic relationships contained in a model involving non-stationary stochastic variables. The cointegration test is able to determine a stable long-term relationship among multiple economic series/variables (Shin, 1994); it is valuable for testing and estimating macroeconomic model where long-run relationships among variables affect present/future observed values. As a contribution to optimum currency theory and economic integration, the research proposes a politico-economic framework (PEF) as the ideal framework for understanding the dynamics of the common currency agenda in the Arab Gulf Region with specific reference to the GCC. The research contributes to an existing body of knowledge on a GCC single currency region by providing the empirical evidences for delay in implementing a single currency. The delay of a single currency is mainly due to political factors. Regarding the economic factors the study found that there are indications of cointegration among the factors; while the political factor has a complex dynamic linked to fear of losing autonomy over monetary and fiscal policy measures and fear of surrendering sovereignty to supra-national institutions on the one hand compared to security concerns. On the other hand, the finding indicates that there is a strong historical pressure supporting the concept of a single currency system in the Gulf States because of its religious and cultural connection to Muslim countries based on the Dinar currency. The research concludes with far reaching recommendations on the circumstances needed to carry forward the GCC single currency. The main finding in this thesis is that the delay in achieving the single currency is purely due to lack of political will not the economic convergence in the GCC countries.

Name dc:type.qualificationname

PhD

Level dc:type.qualificationlevel

Doctoral

Grantor dc:publisher.institution

De Montfort University

Year dc:date.issued

2017

Author dc:creator

• Aljadani, Abdussalam Salem

Licence

• https://dora.dmu.ac.uk/bitstreams/917d7db8-7c73-44a9-95ac-55bc9d3b8948/download