Revisiting the exchange rate debate: the Jamaican experience

✍ Scribed by Fiona Atkins

• Book ID: 101288866
• Publisher: John Wiley and Sons
• Year: 2000
• Tongue: English
• Weight: 130 KB
• Volume: 12
• Category: Article
• ISSN: 0954-1748
• DOI: 10.1002/(sici)1099-1328(200001)12:1<121::aid-jid624>3.0.co;2-t

✦ Synopsis

This paper examines the impact of exchange rate devaluation in an open island economy. By taking account of the non-stationarity of the variables, and identifying the consequent cointegrating relation, the long-run and short-run impacts are identi®ed. The results suggest a signi®cant and negative long-run elasticity of output in response to a devaluation of the real exchange rate. The short-run dynamics indicate that the real exchange rate makes fairly rapid adjustment when there is deviation from the long-run equilibrium relation. Such rapid response to any demand side shocks suggest that the Jamaican economy may be susceptible to Dutch Disease eects.