On the Sustainability of a Monetary Union under External Shocks: a Theoretical Result and Its Application to the Gulf Countries

External shocks, be they political or economic, can pose a significant threat to the sustainability of a monetary union. This paper focuses on the openness of a monetary union, and examines how the degrees and characteristics of the sensitivities of its member nations towards external shocks affect the sustainability of the commitment which each of its members made when joining the union. Furthermore, we discuss the sustainability of the prospective monetary union among the Gulf Cooperation Council countries in the light of obtained insights.