Exchange Rate and Domestic Prices in The GCC Countries - Economic Research Forum (ERF)

Exchange Rate and Domestic Prices in The GCC Countries

Mohamed Abdul Hafez Ghars El-Din and Yousuf Hasan Jawad Mohammad

February, 2001


12 pages

E6. Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

This research aims at studying the effect of changes in the exchange rate on domestic prices in the GCC countries. The methodology is based on specifying and estimating domestic price equations where the exchange rate is included as a major explanatory variable. We also consider the wage-price spiral in order to investigate how inflation rates rise following a given devaluation. The results of the research suggest that the a rise in import prices, following a given devaluation, has a significant effect on domestic prices in the GCC countries.  In this respect, it is found that a 10 per cent devaluation would cause a 2.1 – 7.4 per cent rise in domestic prices.  Policy makers must take this into account when they design different economic policies.


يهدف هذا البحث الى دراسة تأثير التغيرات فى سعر الصرف على الأسعار المحلية فى دول مجلس التعاون الخليجى. وتعتمد المنهجية على تحديد وتقدير معادلات السعر المحلى التى يدخل فيها معدل سعر الصرف متغير تفسيرى أساسى. كما تبحث الورقة تتابع الأجور والأسعار من اجل التعرف على كيفية ارتفاع معدلات التضخم بعد تنفيذ خفض معين لسعر الصرف. ويؤخذ من نتائج البحث أن الزيادة فى أسعار الواردات، عقب خفض معين فى سعر العملة، يكون له اثر ملموس على الأسعار المحلية فى دول مجلس التعاون الخليجى. وتبين فى هذا الصدد ان خفضا لسعر العملة بنسبة 10% فى المائة يؤدى الى زيادة بنسبة 2.1% – 7.4% فى الاسعار المحلية. لذا يجب على من يرسمون السياسة ان يأخذوا ذلك فى اعتبارهم عندما يقومون بتصميم مختلف السياسات الاقتصادية

Mohamed Abdul Hafez Ghars El-Din

Yousuf Hasan Jawad Mohammad



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