Visiting Lecturer Program (7)

Speaker: Maral Shamloo
Ph.D. Candidate
London School of Economics (LSE), London, UK

Local Organizer: Navid Ghaffarzadegan

Title: Are Oil Prices a Suitable Monetary Policy Anchor for the GCC Countries?

Time: Sunday, Dec 18, 2005
Location: School of Management and Economics, Sharif University of Technology, Tehran

Abstract:

Pegging the exchange rate to the price of a main export commodity may be useful as an automatic adjustment mechanism in response to terms of trade shocks. I will present my paper which explores this idea for the oil exporting countries of the Gulf Cooperation Council (GCC). The paper simulates government finance deficits/surpluses and government consumption expenditure, had a peg to export prices been adopted and will compare the results with other conventional pegs, such as a currency basket.

The results show that Kuwait could substantially decrease the volatility in its budget balance by adopting a peg which is based on the price of one barrel of oil. Saudi Arabia could significantly reduce the volatility in the government consumption expenditure by using a currency basket consisting of the dollar, yen and euro.