Essays on economic integration among the Gulf Cooperation Council countries

Abstract

This dissertation focuses on three empirical research questions regarding economic
integration among the GCC countries. Chapter 2 presents the first essay, which
addresses the impact of the GCC economic agreements on intra-GCC trade, non-oil
trade in particular as little is known about the scope for increased non-oil trade within
the GCC. The gravity model of bilateral trade flows is applied to explain patterns of
trade, and possible existence of trade creation between members. Understanding the
determining factors of the GCC’s non-oil trade volumes is a practical empirical task,
as diversification of exports a way from natural resources is seen as one of the main
goals of the GCC policies.

The second essay, chapter 3, looks at the determinants of business cycles
synchronization among the GCC countries and their major trading partners. More
specifically, the essay empirically investigates the relationship between trade, patterns
of specialization and financial openness and how they determine the synchronization
of business cycles. These factors will be evaluated in the context of a system of
simultaneous equations approach, which provide an adequate investigation of the
direct as well as indirect impact of trade, specialization, and financial openness on
output synchronization. Analyzing what determines business cycle synchronization is
an important task for a better evaluation of the costs and benefits of adopting the
proposed common currency among GCC members.

Chapter 4 present the last essay, which considers how much income and
consumption smoothing is undertaken by the GCC countries, where an efficient
smoothing of output fluctuations is vital for reducing the impact of asymmetric
shocks, therefore reducing the cost of adopting a common monetary policy. The
empirical approaches are based on decomposing cross-sectional variance in income
within the GCC countries, and will shed light on the channels through which income
and consumption smoothing take place. Furthermore, the essay focuses on the role of
investment portfolio diversification on smoothing income and consumption.

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