Impacts of Foreign and Domestic Structural Shocks on Consumer Prices of the GCC Countries

Abstract

This paper examines the relationship among exchange rates, oil price, foreign prices and the domestic consumer prices of the GCC countries. A SVAR model is used to identify variety of structural (both foreign and domestic) shocks and examine how the consumer prices of these countries react to these shocks. Results show that the consumer prices of these countries, except Bahrain and Kuwait, react positively to the exchange rate shocks. Consumer prices also react positively to oil price and foreign partners’ price shocks. Impulse responses and variance decompositions generally support and complement the results found in other studies.