OCCASIONAL PAPER SERIES; NO. 31 / JUNE 2005
by Michael Sturm
and Nikolaus Siegfried
"...The analysis of monetary and fiscal convergence in the GCC reveals a remarkable degree of monetary convergence, with generally low inflation rates in all member states and short-term interest rates co-moving in a narrow range. This is due to the GCC currencies’ long-standing alignment with a common external anchor, the US dollar, which has led to a very high degree of intra-GCC exchange rate stability that is all the more noteworthy as it has prevailed in an environment of liberalised capital accounts. Fiscal convergence is less marked than monetary convergence and seems to constitute an important challenge for the GCC. As far as can be discerned from available data, the budget balance-to-GDP ratios as well as public debt levels vary significantly between member states..."