Three essays on financial markets and monetary behavior in GCC countries.

摘要

This dissertation contains three studies discussing the financial market returns' volatility spillover, optimal currency union, and source of real exchange rate fluctuations in Gulf Cooperation Council countries (GCC) 1. This study will give insight into economic integration among these countries in different perspectives.;First, the transmission of stock returns and volatility among GCC stock markets is discussed through an investigation into how these markets' returns are correlated. Covering the period between 2001 and 2005, this study uses daily index returns in each market and analyzes the correlation direction of returns by using a simultaneous multivariate GARCH method. In all cases there are significant direct and indirect relationships between Saudi and Kuwait stock markets in their second moments. Second, the optimal currency union study discusses the opportunity of GCC countries to adopt one currency. The VAR method is the popular method used to uncover the underlying shocks among these countries. The variables that are used in this study will be oil price, GDP growth, and CPI. The model requires two assumptions in additional to the basic VAR's assumptions. The first assumption is that there is no long-run effect of all shocks on oil price except oil shock. The second assumption is that there is no long-run effect of demand shock on GDP growth. The study uses yearly data from 1963 to 2006. There are low correlations among the oil, supply, and demand shocks. The variance decomposition analysis declares that oil shocks play a major role in explaining the movements of the GDP for all GCC countries except Oman in the long-run.;Third, the study of the source of real exchange rate fluctuations explores the sources of real exchange rate fluctuations in GCC countries. The purpose of this study is to clarify to what extent the monetary authority can control real exchange rate fluctuation given their fixed nominal exchange rates. The study starts with decomposing real exchange rate fluctuations into real and nominal shocks. To do this, the study uses a structural VAR model, which assumes that nominal shocks have no long-run effect on the real exchange rate. Then it applies a larger structural VAR containing oil price, oil output, the real exchange rate, and the price level. The study uses quarterly data running from 1980 to 2006. The model suggests that all shocks have no long-run effect on oil prices except oil shocks. Furthermore, real and nominal shocks have no long-run effect on oil production. However, the specific results of this study vary from country to country since some of these countries have low dependence on oil income.;1GCC countries are Saudi Arabia, Kuwait, UAE, Oman, Qatar and Bahrain.