Single Currency in GCC

(Jadresic 2002 , p7 ) Moreover , a principal factor in achieving economic efficiency brought about by "Optimal currency area (OCA ) following the stationary expectations model is product diversification which is currently insufficient among GCC countries . Countries with high degree of product diversification are good candidates for optimizing currency because this facilitates export and economic diversification in the region (Apel 1998 , p94 ) Thus the potential benefit of economic efficiency and regional integration should also focus on the development of the non-oil sectors of nation members

Development of Non oil sectors . The introduction of a

single currency will compel fiscal discipline among the governments of member countries The establishment of a common monetary agency or central bank tasked for regulating the monetary union can also be use to monitor governments from profligacy especially during economic recession or ensure regard of their financial obligations during economic affluence . Moreover , it can also pressure member nations to maintain cautious fiscal policies and dealings . Another benefit of a unified currency is that it can initiate stronger and more profound cooperation of financial markets in GCC in terms of regional integration of money (bond and equity ) markets and policy standardization of interest rate structures , which can help in improving liquidity and creating large capital markets (Oxford Business Group 2007 p54

Costs of a Unified Currency

The adoption of a monetary union in GCC also poses potential macroeconomic costs to GCC 's member nations . This arises principally from the necessity to adhere to the union 's exchange rate and monetary policy for the unified currency , which entails surrendering the power of individual member nations to independently formulate and implement their own monetary policies (Fasano and Schaechter 2003 ) For one , there is the difficulty that individual member nation will face in changing their old currencies and adopting the common currency . In...