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Journal of Economic Integration 2014 June;29(2) :244-266.
DOI: https://doi.org/10.11130/jei.2014.29.2.244
Without Oil, How Do Gulf Countries Move? Non-hydrocarbon Business Cycles
Serhan Cevik 
International Monetary Fund, Washington, DC, USA
Corresponding Author: Serhan Cevik ,Tel: +1 2026236695, Fax: +1 2025896695, Email: scevik@imf.org.
Copyright ©2014 Journal of Economic Integration
ABSTRACT
This paper investigates the empirical characteristics of business cycles and the extent of cyclical comovement in the Gulf Cooperation Council (GCC) countries, using nonhydrocarbon GDP (excluding crude oil and natural gas sectors) and constituents of aggregate demand during the period 1990~2010. Although hydrocarbons still account for an overwhelming share of export earnings and fiscal revenues in the GCC countries leading to a higher degree of business cycle synchronicity at an aggregate level, this is driven largely by external factors influencing the price of crude oil and natural gas. By applying the Christiano-Fitzgerald asymmetric band-pass filter and a mean corrected concordance index, the results show that low level of synchronization in nonhydrocarbon business cycles across the GCC economies and a decline in the degree of synchronicity in the 2000s if Kuwait is excluded from the sample. It is partly because of divergent fiscal policies. The GCC countries do not appear to efficiently coordinate policies, let alone forming an optimal currency area.

JEL Classification
C14: Semiparametric and Nonparametric Methods: General
C25: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
E32: Business Fluctuations; Cycles
E62: Fiscal Policy
F15: Economic Integration
F41: Open Economy MacroeconomicsDB Error: unknown error