The Effects of American Monetary Policy on GCC Economies

International Journal of Economics and Management Studies

© 2019 by SSRG - IJEMS Journal

Volume 6 Issue 9

Year of Publication : 2019

Authors : Radwa Radwan Said

10.14445/23939125/IJEMS-V6I9P115

How to Cite?

Radwa Radwan Said, "The Effects of American Monetary Policy on GCC Economies," SSRG International Journal of Economics and Management Studies, vol. 6,  no. 9, pp. 121-125, 2019. Crossref, https://doi.org/10.14445/23939125/IJEMS-V6I9P115

Abstract:

The GCC countries maintain a policy of open capital accounts and a pegged exchange rate, thereby reducing their freedom to run an independent monetary policy. In this paper, the effects of monetary policy shocks on real economic variables in the GCC economies are examined separately from 1990 to 2017, based on Vector Auto Regression (VAR) approach using data collected from World Development Indicators (WDI), World Bank database. The findings show that Saudi Arabia’s monetary policy has a strong and statistically significant impact on broad money, oil rent, and GDP in the GCC region. The Vector Auto Regressive results illustrate that, when government expenditure is included in model, contemporaneous coefficients indicate that in most countries (except Kingdom of Saudi Arabia- KSA) the interest rate responds negatively to unexpected increase in monetary aggregate. One the other hand, it is also true that the monetary aggregatedecreases with an unexpected increase in federal fund rate. The result shows that, in GCC countries, oil price fluctuations are primarily affected by monetary policy shocks while the remaining components of economic growth and federal funds rates are the other variables frequently affected by monetary policy shocks.

Keywords:

Monetary Policy, VAR, GCC, Federal Fund Rate, Broad Money

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