Monetary Integration Among Oil Exporter Countries: Testing Kenen’s Product Diversification Hypothesis in the Organization of Islamic Cooperation

Abstract

Kenen (1969) hypothesizes that countries that are largely dependent on one export commodity could experience weaker monetary integration and synchronize the business cycle among them. This paper aims to retest Kenen's hypothesis, which is applied to the seven largest oil-producing countries in the Islamic world. This study employs the optimum currency area index and the Pearson correlation matrix to determine the degree of integration and synchronization of the business cycle. This study empirically proves that most oil-producing countries are tightly integrated. Kenen's hypothesis is less applicable to oil-exporting countries, especially oil countries that have a strong economic structure and higher welfare. This study successfully explains the new empirical finding that homogeneity in the export structure is not bad for monetary integration.

Dampak Perubahan Harga Minyak Dunia, Nilai Tukar dan Inflasi terhadap Neraca Perdagangan di Negara-Negara Islam

“…Perubahan harga minyak dunia, nilai tukar, dan inflasi terhadap neraca perdagangan di setiap negara mengalami perubahan yang berbeda bergantung pada kebijakan serta sistem pemerintah yang dianut oleh suatu negara (Agustiar, 2020). Negara Malaysia, Brunei Darussalam, Saudi Arabia, dan Indonesia yang memiliki sistem pemerintahan berbeda, hal ini menjadi menarik untuk dilakukan analisis yang terjadi apabila harga minyak dunia, nilai tukar, dan inflasi mengalami perubahan terhadap neraca perdagangan masing-masing negara.…”

The Relationship Between Oil Prices and Real Estate Loans and Mortgage Loans in Azerbaijan

“…High levels of consumer prices (high inflation) lead to lower real incomes and domestic demand, higher unemployment (Hunt et al, 2001;Nordhaus, 2002;Abosedra and Baghestani, 2004), instability in the stock market, money market and foreign exchange market. causes (Krichene, 2008;Abhyankar et al, 2013;Agustiar, 2020).…”

Determinants of Diversification from Oil Sector in Saudi Arabia

“…Entrepreneurship could play an effective role on regional innovations and would accelerate the economic and industrial diversification (Grillitsch and Asheim, 2018;Xiao et al, 2018), would help the structural changes and diversification process in a country (Neffke et al, 2018) and could accelerate the knowledge spillovers and exports diversification (Chatmi and Elasri, 2018). Agustiar (2020) argued that export diversification may be harmful for monetary integration. He investigated this issue for the 7-oil producing countries and found that export concentration in these countries was not harmful for their monetary integration due to their strong economic structures.…”