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This paper uses a variant of the IMF's Global Economy Model (GEM) to estimate the macroeconomic effects of Yemen's full accession into the Gulf Cooperation Council (GCC). After calibrating the model to Yemen and the GCC countries, several simulations were carried out to estimate the potential impact of economic integration on both. The paper draws two fundamental conclusions. First, further steps in regional integration would enhance competition and produce large economic benefits for both Yemen and the GCC countries. In particular, we show that in some cases economic integration could increase GDP in Yemen by as much as 18 percent and in the GCC by as much as 20 percent over the long run. Second, even if market structures do not improve substantially, GCC enlargement can still generate substantial spillover gains with consumption increasing by up to 7 percent in Yemen and 8 percent in the GCC, respectively.

Competition, International. --- International competition --- World economics --- International relations --- International trade --- War --- Economic aspects --- Gulf Cooperation Council. --- Gulf Co-operation Council --- Co-operation Council for the Arab States of the Gulf --- States of Gulf Co-operation Council --- Golf-Rat --- GCC --- G.C.C. --- Majlis al-Taʻāwun al-Khalījī --- Majlis al-Taʻāwun al-Khalījī al-ʻArabī --- GKR --- Kooperationsrat Arabischer Staaten am Golf --- Cooperation Council for the Arab States of the Gulf --- Duwal Majlis al-Khalīj --- Gŏlpʻŭ Hyŏmnyŏk Wiwŏnhoe --- Kŏlpʻŭ Hyŏmnyŏk Wiwŏnhoe --- Majlis al-Taʻāwun li-Duwal al-Khalīj al-ʻArabīyah --- Golfkooperationsrat --- AGCC --- A.G.C.C. --- Duwal Majlis al-Taʻāwun al-Khalījī --- Sovet sotrudnichestva arabskikh gosudarstv Persidskogo zaliva --- SSAGPZ --- Arab Gulf Cooperation Council --- مجلس التعاون الخليجي --- مجلس التعاون لدول الخليج العربية --- Shūrā-yi Hamkārī-i Khalīj-i Fārs --- شوراى همکارى خليج فارس --- Persian Gulf Cooperation Council --- PGCC --- Conseil de coopération du Golfe --- Gulf Cooperative Council --- Consiglio di cooperazione del Golfo --- Ccg --- Yemen (Arab Republic) --- Arabische Republik Jemen --- Arab Yemeni Republic --- République arabe yéménite --- Arab Republic of Yemen --- Jumhūrīyah al-ʻArabīyah al-Yamanīyah --- YAR --- Y.A.R. --- République arabe du Yémen --- Republiḳah ha-ʻArvit ha-Temanit --- Temān --- Noord-Jemen (Republic) --- Yemen (Ṣanʻāʼ) --- Yemen (Republic) --- Econometric models. --- Finance: General --- Foreign Exchange --- Labor --- Macroeconomics --- International Economic Order and Integration --- Open Economy Macroeconomics --- Macroeconomic Aspects of International Trade and Finance: Forecasting and Simulation --- General Financial Markets: General (includes Measurement and Data) --- Demand and Supply of Labor: General --- Macroeconomics: Consumption --- Saving --- Wealth --- Finance --- Labour --- income economics --- Currency --- Foreign exchange --- Labor markets --- Competition --- Consumption --- Real exchange rates --- Commodity markets --- Financial markets --- National accounts --- Labor market --- Economics --- Commodity exchanges --- Yemen, Republic of --- Income economics

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Monetary policy in Yemen is largely rudimentary and ad hoc in nature. The Central Bank of Yemen's (CBY) approach has been based on discretionary targeting of broad money without any clear target to anchor inflation expectations. This paper argues in favor of a new formal monetary policy framework for Yemen emphasizing a proactive and rule-based approach with a greater direct focus on price stability in the context of a flexible management of the exchange rate. Although, as in many developing countries, institutional capacity is a concern, adopting a more formal framework could impel the kind of changes that are required to strengthen the ability of the CBY in achieving low and stable rates of inflation over the medium term.

Anti-inflationary policies -- Yemen (Republic). --- Monetary policy -- Yemen (Republic). --- Monetary policy. --- Finance --- Business & Economics --- Money --- Monetary policy --- Anti-inflationary policies --- Antiinflationary policies --- Inflation (Finance) --- Monetary management --- Government policy --- Economic policy --- Price regulation --- Currency boards --- Money supply --- Foreign Exchange --- Inflation --- Money and Monetary Policy --- Price Level --- Deflation --- Monetary Policy --- Macroeconomics --- Currency --- Foreign exchange --- Monetary economics --- Monetary policy frameworks --- Exchange rates --- Exchange rate flexibility --- Exchange rate pass-through --- Prices --- Yemen, Republic of