As of 2015, the total Gross Domestic Product (GDP) of the GCC Region was $1.74 billion. Between them, these six countries hold close to 40% of the world’s oil reserves in its land––the largest in the world with 486.8 billion barrels––and 22% of the world’s proven gas reserves (GCC, 2015). However, the current risk to the outlook of the economy in the region is a decline in oil prices whereby external oil shocks could severely impact the macro economy. Based on a study of GCC 2020 conducted by The Economist (2010), the GCC countries depend largely on the production and export of oil, which is roughly 40% of the region’s GDP. However, expectations indicate the depletion of most reserves of oil within 25 years, which pushes these countries to work on diversifying their economies. Exchange rate management in the GCC has been a significant concern for both economic and political research. Thus, the consideration of exchange rate regimes became a controversial issue for policy makers especially those in the GCC. The US represents only 7% of the region’s total trade, which makes the benefit of pegging to the USD economically questionable. Based on the need of adjusting monetary policies according to the needs of the domestic economies of the GCC, especially during high inflation periods and external oil shocks periods, the contemplated research will seek to recommend a more suitable exchange rate policy that best benefits these economies. Moreover, using empirical findings, the contemplated research will identify a specific taxation policy that can help GCC governments diversify their income so that it is not so highly dependent on oil revenues.
About The Author:
Ms. Rola Mourdaa is a Doctor of Philosophy in Economics candidate at Monarch Business School Switzerland. She holds a Masters of Financial Economics and a Bachelor of Business Administration from the American University of Beirut and a Bachelor of Political and Administrative Sciences from the Lebanese University. At present, she is an instructor at the Australian College of Kuwait.
Exchange Rate Management, Oil Shocks, Income Tax, GCC, Computational General Equilibrium, Social Accounting Matrix, Bahrain, Kuwait, Saudi Arabia.