„Five Gulf Nations move closer to common currency (Wall Street Journal, June 12, 2008)
Dubai, United Arab Emirates – The approval of a draft monetary union treat by central bank governors from Saudi Arabia, Quatar, The United Arab Emirates, Bahrain and Kuwait this week marks a critical step toward creating a single currency in the Persian Gulf by 2010, a regional monetary official said.
In an interview with Masser Al Kaud, director of monetary integration at the Gulf Cooperation Council, said the step would also make it harder for individual central banks int he region to adjust their existing currency pegs to the USD. „This will make it no feasible for them to do anything with their exchange rates,” he said.
The draft Monetary Union Treaty spells out the functions of a proposed GCC monetary authoritym which will eventually becoma the region’s currency- issuing central bank, eplacing the current national authorities.
The draft treaty…”
Pegging: a direct , strict switching between the home currency and the USD.
They are going to use an indirect currency system.
Floating: constant movement of the currency exchange.
§ Syllabus is available from this week
Question for the case study
What will be the Persian Gulf Monetary Union about? Which other monetariay union have you heard of?
What could have been the rationale for the Persian Gulf states behind pegging their currencies to the USD?
2nd consultation
The monetary supply process and the demand for money
supply: offering something (kínálat)
demand: (kereslet)
market: demand and supply side
households give orders to money
supply side: banks
Supply of money
Composition of the two-tier banking system => two levels : upper: ce ...