Economics GCCs Dollar Peg - Essay Example

Comments (0) Cite this document
Till 20th May 2007 the six nations of Gulf Cooperation Council (GCC) had unanimity on the six nation's monetary policy; that they would peg their currencies with the US Dollar. This in effect implied that Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE had a common and more or less fixed rate for exchanging with dollar…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER98.4% of users find it useful
Economics GCCs Dollar Peg
Read TextPreview

Extract of sample "Economics GCCs Dollar Peg"

Economics - GCC's Dollar Peg Till 20th May 2007 the six nations of Gulf Cooperation Council (GCC) had unanimity on the six nation's monetary policy; that they would peg their currencies with the US Dollar. This in effect implied that Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE had a common and more or less fixed rate for exchanging with dollar. This proposition had brought in lot of foreign capital investment in the country while providing a support base for the dollar. But during the last couple of years, when dollar started coming under pressure and it became weak as compared to other major currencies around the world like the Euro, the gulf nations started feeling the pinch. This trend is considered a major contributor to the rising levels of inflation in the gulf region. The current levels of inflation are stated to be the highest in the last 30 years (Seville, 2008). At the same time the GDP growth started declining during the same period. Zawya (2008) wrote about some of the research studies carried out in 2008 which predicted that the gulf nations would be able to register a lower nominal GDP rise of about 16.4 percent till 2010, provided the crude prices average around $120 per barrel in 2008, $131 in 2009 and $133 in 2010. But, with crude oil prices tumbling down to $50 per barrel in the international market, the situation is starkly different today. Such developments resulted into a serious debate on how the gulf nations should take appropriate measures to handle the situation.
In the run up to the discussion towards taking mutually agreed steps for handling the monetary crisis in the gulf region, the GCC started discussing measures like adopting a common currency within the region. 2010 was being talked about as the deadline for coming out for a currency union (Ghafour, 2005). But these plans received a jolt when Kuwait unilaterally decided that it needs to move away from dollar peg. This step was taken by Kuwait central bank in order to contain the rising inflation. At a time when crude oil prices are falling, economies which are mainly dependent on oil like the GCC nations, have a reason to get worried. The situation gets compounded when the dollar peg mechanism is resulting in further losses during the time when dollar's position is further weakening. These nations are in a way forced to buy the undesired dollar reserves. Therefore it is quite natural that demands are coming up from a number of stakeholders that GCC should de-peg itself from dollar. But the moot question is will such a move prove to be a panacea for the prevailing bad weather around the economic conditions. The gulf nation's viewpoints differ in answering this question.
While on the one hand there are calls to switch currency peg from dollar to a basket that includes oil, there are views which state that the smaller economies in the gulf region might not be able to sustain wider fluctuations in the international market. In addition, fears are also being expressed that floating may not prove to be beneficial for an economy which relies majorly on oil. For example, Saudi Central Bank Governor Hamad Saud al-Sayyari said, "Floating is beneficial when the economy and exports are diverse ... as for the kingdom it remains reliant on the export of a single commodity" (Karam and Carvalho, 2008). Therefore, it is quite apparent that GCC nations are not yet ready for immediate de-peg from dollar. It would be in the interest of GCC economies that they can come up with industries in big way, so that part of the burden is taken off from the hydrocarbon dependence, and these nations will then be able to sustain oil shocks as well. Under those circumstances it would be wise for them to de-peg from the dollar.
1. Ghafour, P.K. Abdul (2005). 'GCC Currency in 2010: Al-Assaf'. Arab News. Available online at§ion=0&article=61225&d=29&m=3&y=2005 (April 25, 2009)
2. Karam, Souhail and Carvalho, Stanley (2008). 'Dropping Gulf dollar peg would ease inflation: Greenspan'. Available online at (April 25, 2009)
3. Seville, Charles (2008). 'It's a free run for inflation in GCC'. Gulf News. Available online at (April 25, 2009)
4. Zawaya (2008). GCC states' nominal GDP to grow 16.4%. available online at (April 25, 2009) Read More
Cite this document
  • APA
  • MLA
(“Economics GCCs Dollar Peg Essay Example | Topics and Well Written Essays - 500 words”, n.d.)
Economics GCCs Dollar Peg Essay Example | Topics and Well Written Essays - 500 words. Retrieved from
(Economics GCCs Dollar Peg Essay Example | Topics and Well Written Essays - 500 Words)
Economics GCCs Dollar Peg Essay Example | Topics and Well Written Essays - 500 Words.
“Economics GCCs Dollar Peg Essay Example | Topics and Well Written Essays - 500 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document


Dollar General

...of various product categories. In addition to these, price levels are always monitored and updated in terms of economic and competitive factors that affect them. If these complications are not enough, the most challenging task for far is to make shopping a convenient task and a pleasurable experience to consumers. Shelving products in proper classifications and indicating prices clearly and properly are ensured. Perks and promotional campaigns, though handled by another supervisor, need to be evaluated in terms of its effect on saleability and inventory levels. All the intricacies must be hidden from the critical eyes of consumers. One’s responsibility is to ensure that products are perfectly presented and prepared in...
2 Pages(500 words)Essay

Economics _ Whither the Dollar

.... According to US economist Brad DeLong, on almost every point where Keynes’ ideas were canceled by the Americans, he was later proved correct by events of history. The Primary Real Causes of the Financial Crisis of 2008 According to the article “Whither the Dollar” by Katherine Sciacchitano, there are a few reasons and events, which triggered the beginning stages of the financial crisis of 2008. The first is the elimination of capital control. This deepened economic stability in many ways: - It made it easier for capital to search for the lowest possible wages; - It increased the political power of capital by enabling it to “vote with its feet” - It fed asset bubbles, increased financial speculation and...
5 Pages(1250 words)Essay

Depression and Anxiety in PEG Feeding

...?Department of Operating Department Practice Cardiff __________________________________________________ THE IMPLICATIONS OF DEPRESSION ANDANXIETY IN PERCUTANEOUS ENDOSCOPIC GASTROSTOMY (PEG) FEEDING: A DISCUSSION OF QUALITY OF LIFE, HEALTH CARE AND PATIENTS IN OPERATING PRACTICE Submitted by: … ...2011 Word count, pp. 4-37: 10,191 Acknowledgments I must thank my supervisor in the Department of Operating Department Practice, University of Cardiff, for his (her) kind help and many suggestions when writing my dissertation. I would also like to thank. Expand a few lines… TABLE OF CONTENTS TABLE OF CONTENTS 3 LIST OF FIGURES Abstract This dissertation is about the social and psychological impact, including anxiety and...
40 Pages(10000 words)Dissertation

Dollar Tree

...of any company for any length of time. Dollar Tree has been able to become such a company, gradually acquiring other discount chains over the years, to now have a presence throughout the entire continental United States and Canada. This paper serves to explain some of the reasons behind their success, as well as providing a description of some future challenges on the horizon. Case Challenge 1 The first challenge facing Dollar Tree rests in the reality that the company’s initial growth was accomplished almost exclusively through acquisition. The question then becomes whether or not this will be an attractive option in the near future. The reality is that expansion through acquisition will likely be quite...
7 Pages(1750 words)Case Study

Dollar Decline

...?Dollar Decline INTRODUCTION A decline especially in the purchasing power of a dollar mainly occurs due to the rise of certain economic problems thatinclude weak recovery process and increasing public debt among others. This worldwide concern may adversely affect the economic performance of the United States of America (US) at large. The effects can appear in the form of increased level of export activities, minimizing purchasing power of the individuals on an international basis, rising commodity prices and upward trend of interest rates. The declining value of dollar is likely to unfavorably affect the purchasing power of the US citizens due to...
5 Pages(1250 words)Essay

Trillion Dollar Bet

...Overview of "Trillion Dollar Bet" What this program ultimately attempts to do is give an overview of the history, as well as the investment strategies that are involved with Long Term Capital Management. This is an investment firm and hedge fund that began in the mid nineties, with it finally closing in 1999. This movie can be summed up as being both interesting and informative. While not only striving to educate the viewer with a sampling of the history behind quantitative finance and options trading, it also sets out to illustrate the current attitudes about mathematical modeling in finance. Quantitative finance is still a huge part of institutional investing, but despite that fact there are still those traders who...
3 Pages(750 words)Essay

Million Dollar Invention

...There are many ways that a medical professional or scientist can spend a million dollars. It can be used to develop hardware that will help make patient diagnosis easier or, it can also be used to pursue scientific studies that could lead to the possible eradication of certain illnesses. In my case though, I would use the money more for the scientific discovery of the DNA strands that cause illnesses. I would use the million dollars in order to set up a research facility whose sole purpose is to study the evolution of the human DNA and discover what sets each chain apart from the other. I have this belief that each DNA strand in human beings eventually spin off into various functions and develop certain intricacies which dictate... that...
2 Pages(500 words)Scholarship Essay


...Admission Application One Million Dollar Plan Introduction An amount of one million dollar may at first seem to be a huge amount and people may believe that one can send their entire life with this amount. The recent buyout of WhatsApp by Facebook amounted for a total of $19 billion and that is a point of realization that one million dollar is a very small amount of money but if it is used in the correct manner, then its benefits can be realized throughout the life. This writing will focus on how I plan to spend or use an amount of dollar one million and the rational reasons behind the way I use them. Body Having one million dollar in one instance will...
2 Pages(500 words)Admission/Application Essay

The Almighty Dollar

...It seems that material wealth has always been a number one in the American culture alongside with the opportunity ofself-determination and self-fulfillment. Today, as the economic situation in the country and the whole world shows, the time has come to change the priorities in the societys life. The United States are in great debts, and to some degree it is the societys fault as well because people have not noticed that serious problems were coming for they were in pursuit of material wealth. Now the youngest generations have to pay off the debts of the previous ones; so, it is a high time to put the longing for material wealth aside. Not only Americans but all the other people as well should forget that money is...
1 Pages(250 words)Essay

The High Australian dollar

...INFLUENCE OF RISE IN AUSTRALIAN DOLLAR ON FOREIGN TRADE Executive Summary The purpose of the essay is to analyse the impact of rising value of Australian dollar on its foreign trade. This essay provides clear insights into various factors that have been driving the value of Australian currency just after the Global Financial Crisis (GFC). The study also helps to uncover range of factors that influences the Australian economy both in short and long run. The essay found that, the increase in the value of Australian dollar has both short term and long term impacts on various sectors, for instance, unemployment rate, economic stability, manufacturing and tourism. Even if it becomes difficult to overcome these issues in the short run... ,...
7 Pages(1750 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Economics GCCs Dollar Peg for FREE!

Contact Us