Abstract
After two decades of impressive success in maintaining price stability, inflationary pressures have emerged since 2003 in all the Gulf Cooperation Council (GCC) countries, with the oil boom putting the control of inflation at the top of the agenda for policymakers in the region. Some have blamed these pressures mainly on the peg to the weakening US dollar, others on global shocks related to high food prices, local supply shortages related to rent, and demand shocks induced by large fiscal spending and an expansionary monetary stance imported from the US through the dollar peg. Accordingly, the remedies proposed include revaluation or adopting a more flexible exchange rate regime in order to gain monetary policy independence, higher subsidies, addressing supply bottlenecks, and containing government expenditures.
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