Supporters of the Arab oil-exporting countries' decades-long fixed exchange rate regime argue that since, oil is traded in United States (US) dollars, pegging to the dollar is optimal.However, the weakening relationship between oil prices and the US economy in terms of
JEL Classification: E32, E61, F44.Keywords: Oil price, Business cycle synchronization, Counter-cyclical monetary policy, Exchange rate regimes. * We are very grateful to Elsayed Elsamadisy for helpful advice and stimulating conversation at an early stage of the paper. We thank two anonymous reviewers for very helpful and detailed comments and suggestions. We also thank Megan Foster for very careful proofreading and numerous suggestions. The views in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the affiliated institutions.