TITLE:
Common Currency Area in GCC Region: An Application of Euro Model
AUTHORS:
Waqar Ahmad
KEYWORDS:
EMU, GCC, Convergence Criteria, Triangular Arbitrage
JOURNAL NAME:
American Journal of Industrial and Business Management,
Vol.11 No.8,
August
20,
2021
ABSTRACT: US Dollar (USD) is the most dominant currency encompassing 59.54% of the world reserve currency. Euro is the second one, which holds 20.57% share of world reserve currency. The recent studies reveal that the USD might not be the dominant world reserve currency in the future. Euro as a common regional currency is the only competitor of USD, which shows the strength of a unified regional currency. In 1981, the six rich oil states formed Gulf Cooperative Council (GCC); the countries include the Kingdom of Saudi Arabia, the State of Qatar, the Sultanate of Oman, the Kingdom of Bahrain, the State of Kuwait, and the United Arab Emirates. This establishment of GCC signifies the close cultural, economic and political link between the GCC countries. GCC countries have almost all essential ingredients required to establish a common currency area or monetary union. The researcher applied the European Monetary Union (EMU) model to GCC states to find out the feasibility of a common currency or monetary union between GCC states. Currently, EMU is the only example of successful implementation of common regional currency founded on Mundell’s theory of Optimum Currency Area (OCA). The results obtained indicate that all the GCC states successfully fulfill the Euro criteria which are also called Maastricht criteria. The research has established that GCC countries are ripe for establishing a monetary union, especially if they follow the steps of EMU.