A proposal to anchor the monetary policy of MENA oil-exporting countries by the price of oil

Abstract

This paper aims to study for each of MENA oil-exporting countries what would have happened, over the period spanning from 1970 to 2010, if it had pegged its currency to oil prices, as compared to pegging to the dollar, yen, euro or Dutch mark, or as compared to whatever exchange rate policy it actually followed historically. Using the PEP proposal of Jeffrey Frankel, we test whether the suggestion of pegging the oil price is appropriate for the oil exporters of the MENA region. Our paper proposes a more competitive monetary regime for the oil-exporting countries of the MENA region. However, it has some data limitations especially that the MENA region has no reliable statistics nor do some countries, such as the United Arab Emirates, have enough statistics.