Monetary Policy And Deficits Financing In Jamaica
AbstractA vector error-correction model (VECM) is estimated to examine the relationship among interest rates, monetary base, credit claims to the private sector, real income, prices, government spending, budget deficits and exchange rate in Jamaica. Cointegration is used to identify the VECM. The empirical results show that fiscal deficits are monetized in the long-run; the roles of financial services are weak, and inverse price-real output relationship exists in both the short-run and the long-run. Monetary disciplines, reduction in fiscal spending and sound regulatory actions are crucial to reduce the national debt, the inflation and interest rates, crowd in private investments, avert financial crisis and promote economic growth.
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Bibliographic InfoArticle provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.
Volume (Year): 28 (2003)
Issue (Month): 1 (June)
Vector Error-correction Model; Fiscal Spending; Financial Services; Deficit Finance; and Jamaica;
Find related papers by JEL classification:
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
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- Dickey, David A & Rossana, Robert J, 1994. "Cointegrated Time Series: A Guide to Estimation and Hypothesis Testing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(3), pages 325-53, August.
- Ghartey, Edward E., 2008. "The budgetary process and economic growth: Empirical evidence of the Jamaican economy," Economic Modelling, Elsevier, vol. 25(6), pages 1128-1136, November.
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