The paper’s objective is to empirically invistigate whether monetary policy in GCC counties is integrarted and/or affected by monetary policy of the industrialized countries. To this end, the study tests possible cointegration and Granger‐causality between real interest rates of two GCC countries, namely Saudi Arabia and Bahrain, and two industrialized countries, USA and Japan. The econometric methodolgy is based on the Johansen (1998) cointegration technique and on Dolado and Kuthepohi (1996) who used Tode and Yamamoto (1995) Wald test for Granger non‐causality in integrated and cointegrated systems. The Wald test value is obtained by using Seemingly Unrelated Regressions. The empirical results of the paper show that the monetary system of Saudi Arabia is well integrated and influenced by economic indicators of the US, while neither the US nor the Japanese monetary systems have a great influence on the financial market of Bahrain.
Abdul Rahman Al‐yousef, N. (2004), "Interest Rates Parity Between Industrial Countries and Gulf Cooperation Council Countries (GCC)", Journal of Economic and Administrative Sciences, Vol. 20 No. 1, pp. 1-22. https://doi.org/10.1108/10264116200400001
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