GCC economic integration: Statistical harmonization for an effective monetary union

Abstract

The 1970 Werner Report on economic and monetary union in the European community states a monetary union implies inside its boundaries the total and irreversible convertibility of currencies, the elimination of margins of fluctuation in exchange rates, the irrevocable fixing of parity rates and the complete liberation of movements of capital (The Werner Report of 1970). Alternatively stated, three aspects should characterize a monetary union or a currency union. These are (1) a single currency or several currencies that are fully convertible at an irrevocably fixed exchange rate, (2) union-wide monetary policy that is determined by a single central bank or a system of central banks, and (3) a sole external exchange rate policy (Masson and Pattillo 2001). This chapter follows the line of thought that uses the single currency and a monetary union interchangeably, given that exchange rates are irrevocably fixed.