Gulf Currency Union Research Proposal Example | Topics and Well Written Essays - 1500 words

Gulf Currency Union - Research Proposal Example Keywords: Gulf Currency Union, GCU, Middle East, Saudi Arabia. Gulf Currency Union: A Research Proposal Gulf Currency Union is a popular object of professional discussion. Much has been written and said about its benefits and potential costs for the Gulf countries. GCU exemplifies a complex product of multiple influences and reflects the growing role of globalization and integration in economic relations between Middle Eastern countries. However, how GCU will affect these countries remains unclear. Clearly, there is a need for a study of GCU and its effects on Saudi Arabia. The choice of this research topic is justified by the growing importance of GCU ideas in the Middle East and the lack of information about the benefits and costs of GCU for Saudi Arabia. It is imperative that the effects of the currency union on Saudi Arabia be understood in their entirety, to ensure that the country uses the potential of GCU membership to the fullest and can easily avoid its drawbacks. Literature Review The growing body of literature indicates sustained popularity of GCU and related subjects in literature. The history of economic cooperation between GCC states dates back to 1981, when the Free Trade Area in the GCC region was established and a unified Economic Agreement was ratified (MacDonald & Al Faris, 2010). Since 1981, economic cooperation in among the six GCC states had been rapidly expanding (MacDonald & Al Faris, 2010). Unfortunately, because of numerous political tensions in the Middle East, the GCC states failed to implement the vision of economic integration; it was not before the beginning of the 21st century that the idea of a common trade and currency area was revitalized (MacDonald & Al Faris, 2010). During the 1990s, the GCC countries also attempted to establish a customs union (MacDonald & Al Faris, 2010). Today, the existing relationships between Gulf countries lay a solid foundation for implementing the Gulf Currency Union idea into practice. It should be noted, that more and more researchers are interested in analyzing the effects of GCU on the Middle Eastern world. The topic of monetary union in the Gulf region remains one of the popular objects of public and political debate. Previous literature â€Å"has concentrated on three main themes, namely, the costs and benefits of a single currency in the short and long term; the degree of macroeconomic policy coordination and the extent to which the Gulf States meet the theoretical criteria of an optimal monetary union; and finally the best exchange rate regime for the single currency.† (MacDonald & Al Faris, 2010, p.9) There is no agreement on the pros and cons of GCU for Middle Eastern countries. According to Buiter (2007), the union can benefit the GCC countries in that it promotes economic openness and financial security, as well as greater integration followed by the development of a common goods/ services/ capital/ labor markets. However, the lack of supranational governmen t bodies and institutions makes such outcomes extremely unlikely; moreover, countries joining GCU will have to sacrifice their political independence for the sake of economic integration (Buiter, 2007). Al-Bassam (2008) explored the benefits of GCU for Bahrain and developed a list of factors supporting GCU, including the elimination of currency transaction costs, considerable economic and financial savings, minimization of exchange rate risks, better pricing transparency and improved competition in business, greater fiscal