Eu Countries And Gcc Countries - 1721 Words

Executive Summary EU countries and GCC countries have high economic openness level so they are OCA in terms of openness. Although the GCC has low level on intra-regional trade, the fixed exchange rage regime still be the optimal policy due to the fact that the main export commodity is oil in GCC countries, they do not need to adjust exchange rate between GCC countries due to their exchange rate fixed to the dollar which is the official currency in oil transaction. EU countries is not OCA in terms of labor mobility because the labor movement is not free. However, currently GCC countries are a OCA in the criteria of labor mobility because expatriates account large percentage in their labor force. In the long term, GCC countries with high population growth rate will be challenged in the labor mobility if they make the employment localization. GCC is not ready to be a single currency union and need more preparations. GCC countries is an OCA because they have a high level of economic integration which is based on the rich oil resource. In the future, when the oil and gas endowment exhaust, GCC should achieve economic diversification and low inflation consistency to satisfy the requirements to be an OCA. Countries with high openness level can fix their exchange rates and establish OCA to balance external payments. McKinnon believes that openness influences the choice of exchange rate regime. Real depreciation in a high economic open country will lead to inflation, theShow MoreRelatedThe High Level Of Openness And Labor Mobility1642 Words   |  7 Pagesoptimal currency area (OCA). EU and GCC countries are OCA in terms of openness because they have high economic openness level. 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