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Volume :17 Issue : 65 1992      Add To Cart                                                                    Download

THE MECHANISM OF SINGLE AND BASKET OF CURRENCIES PEGS: A CASE STUDY OF THE GCC’S CURRENCIES

Auther : Dr. Saif Saeed Al-Suwaidi

 

         The collapse of the international monetary agreement of Bretton Woods in the early 70’s has resulted in some countries choosing to adopt a single present paper discusses the mechanism of these two alternatives, showing how they would operate from a technical point of view.  Moreover, it determines the required conditions so as to keep the established parity intact in cases of changing exchange rates.

         As an empirical application, the behavior of currencies of the member states of the GCC was explored.  It was found that although they have been related to the dollar more closely than any other currency, it was not without alteration of the parity, which was conducted in periods of depreciation of the dollar vis-à-vis the other major currencies in the world.

         Measuring the variance of the exchange rates of the GCC’s currencies against the other major currencies, a basket peg adopted by the Kuwait has proven to insulate the Kuwaiti Dinar from variations with respect to the currencies of its major trading partners in the industrial world.

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