Question

* write a report that STYLIZED FACTS between U.S. MONETARY POLICY AND GCC COUNTRIES banks

Answer 1

Monetary policy in the GCC countries is sensitive to the monetary policy in the U.S in view of the pegged exchange rate regimes to the U.S dollar. This continue to serve GCC countries well, providing a clear and creditable monetary policy. The GCC monetary authorities conduct monetary policy in the context of pegged exchange rate regimes. U.S interest rates are followed but GCC policy rates. Most of the GCC central banks have been moving domestic policy rates in with U.S Federal Reserve which is consistent with previous tightening and easing cycles. GCC countries mainly depends on oil because as it is their main source of export and fiscal revenues. Oil contributed 62 percent of GCC exports and 72 percent of GCC government revenues. Central banks manage liquidity to limit imbalances and by ensuring short term market interest rates and are consistent with their policy rates and to avoid actions by banks that may run counter to their objectives. Tight liquidity conditions can increase the cost of funding for banks and lead to higher lending rates that curtail credit expansion with potential implications for growth. The operation of monetary policy is complicated by the large oil price driven liquidity fluctuations. In some GCC countries, liquidity have made more difficult for central banks to steer short term market interest rates with liquidity imbalances which reduces the pass through policy rates to interbank rates. In GCC countries, interbank rates have been influenced by liquidity rates up.