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ECCU Business Cycles: Impact of the U.S

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  • Ms. Yan M Sun
  • Mr. Wendell A. Samuel

Abstract

With a fixed peg to the U.S. dollar for more than three decades, the tourism-dependent Eastern Caribbean Currency Union (ECCU) countries share a close economic relationship with the U.S. This paper analyzes the impact of the United States on ECCU business cycles and identifies possible transmission channels. Using two different approaches (the common trends and common cycles approach of Vahid and Engle (1993) and the standard VAR analysis), it finds that the ECCU economies are very sensitive to both temporary and permanent movements in the U.S. economy and that such linkages have strengthened over time. There is, however, less clear-cut evidence on the transmission channels. United States monetary policy does not appear to be an important channel of influence, while tourism is important for only one ECCU country.

Suggested Citation

  • Ms. Yan M Sun & Mr. Wendell A. Samuel, 2009. "ECCU Business Cycles: Impact of the U.S," IMF Working Papers 2009/071, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2009/071
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    References listed on IDEAS

    as
    1. GRENADE, Kari & MOORE, Winston, 2008. "Co-Movements Between Foreign And Domestic Interest Rates In A Fixed Exchange Rate Regime: The Case Of The Eccu And The Us," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(1), pages 119-130.
    2. Mr. Vladimir Klyuev, 2008. "Real Implications of Financial Linkages Between Canada and the United States," IMF Working Papers 2008/023, International Monetary Fund.
    3. Jorge Herrera Hernández, 2004. "Business cycles in Mexico and the United States: Do they share common movements?," Journal of Applied Economics, Universidad del CEMA, vol. 7, pages 303-323, November.
    4. Mr. Tamim Bayoumi & Mr. Andrew J Swiston, 2008. "Spillovers Across NAFTA," IMF Working Papers 2008/003, International Monetary Fund.
    5. Herrera Hernandez, Jorge, 2004. "Business cycles in Mexico and the United States: Do they share common movements?," Journal of Applied Economics, Universidad del CEMA, vol. 7(2), pages 1-21, November.
    6. Herrera Hernandez, Jorge, 2004. "Business cycles in Mexico and the United States: Do they share common movements?," Journal of Applied Economics, Universidad del CEMA, vol. 7(2), pages 1-21, November.
    7. Ms. Prachi Mishra, 2006. "Emigration and Brain Drain: Evidence From the Caribbean," IMF Working Papers 2006/025, International Monetary Fund.
    8. Mr. Shaun K. Roache, 2008. "Central America’s Regional Trends and U.S. Cycles," IMF Working Papers 2008/050, International Monetary Fund.
    9. Mr. Paul Cashin, 2004. "Caribbean Business Cycles," IMF Working Papers 2004/136, International Monetary Fund.
    10. Jorge Herrera Hernández, 2004. "Business Cycles in Mexico and the United States: Do They Share Common Movements?," Journal of Applied Economics, Taylor & Francis Journals, vol. 7(2), pages 303-323, November.
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    Cited by:

    1. Kouame,Auguste Tano & Reyes,M. Ivanova, 2016. "Before and after the global financial crisis : evaluating the Caribbean's synchronization with global engines of growth," Policy Research Working Paper Series 7544, The World Bank.
    2. Agbeyegbe, Terence D., 2020. "Bayesian analysis of output gap in Barbados," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 1(1).

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