ECONOMIC CONVERGENCE AND MONETARY UNION IN ARABS COUNTRIES

Abstract

This study assesses the potential for monetary union across fifteen Arab countries through a convergence analysis using Hierarchical Cluster Analysis (HCA) and Optimal Currency Area (OCA) criteria. Focusing on macroeconomic stability, trade integration, and shock resilience, it reveals strong convergence within the Gulf Cooperation Council (GCC), driven by aligned business cycles, robust trade linkages, and high shock-absorptive capacity. Conversely, the Arab Maghreb Union (AMU) shows partial convergence, with Morocco and Tunisia forming a promising core, while Algeria’s hydrocarbon dependency creates divergence. The study identifies potential for strengthened inter-regional convergence through the inclusion of Tunisia, Morroco and Jordan. Although economic prerequisites exist (particularly in the GCC), political fault lines remain the primary barrier. These findings demonstrate that a viable monetary union requires both measurable economic convergence and sustained political commitment, providing policymakers with an empirical framework for integration pathways.