Is the Caribbean Community an Optimum Currency Area?
This study analyzes the viability of the Caribbean Market Economies (CME) as an optimum currency area. A vector error correction model is used with cointegration as an identifying restriction to decompose real output, prices and exchange rate into supply, demand and monetary shocks. Respective shocks are then tested for symmetry between countries to assess their suitability in meeting the optimum currency area (OCA) criteria. The US is used to capture global effects in assessing the convergence of the optimum OCA criteria. It is then used as a yardstick to compare size of shocks and speed of adjustment to those shocks to determine the viability of the CME as an optimum currency area. Shocking results from impulse response functions show that the Eastern Caribbean Currency Area (ECCA) members meet the OCA convergence criteria better than the non-ECCA members. However, the overall results depict that the Caribbean Community are not a suitable OCA as some of their correlation results are asymmetrical, and have large size of shocks and slow speed of adjustment relative to the US.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 8 (2008)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.usc.es/economet/eaa.htm|
|Order Information:|| Web: http://www.usc.es/economet/info.htm Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Charles R. Bean, 1992.
"Economic and Monetary Union in Europe,"
Journal of Economic Perspectives,
American Economic Association, vol. 6(4), pages 31-52, Fall.
- Summary, Rebecca M, 1989. "A Political-Economic Model of U.S. Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 179-182, February.
- Lippi, Marco & Reichlin, Lucrezia, 1993.
"The Dynamic Effects of Aggregate Demand and Supply Disturbances: Comment,"
American Economic Review,
American Economic Association, vol. 83(3), pages 644-652, June.
- Marco Lippi & Lucrezia Reichlin, 1993. "The dynamic effects of aggregate demand and supply disturbances: comment," ULB Institutional Repository 2013/10159, ULB -- Universite Libre de Bruxelles.
- George S. Tavlas, 2009. "Optimum-Currency-Area Paradoxes," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 536-551, 08.
- Bayoumi, Tamim & Eichengreen, Barry, 1992.
"Shocking Aspects of European Monetary Unification,"
CEPR Discussion Papers
643, C.E.P.R. Discussion Papers.
- Tamim Bayoumi & Barry Eichengreen, 1992. "Shocking Aspects of European Monetary Unification," NBER Working Papers 3949, National Bureau of Economic Research, Inc.
- Tamim Bayoumi and Barry Eichengreen., 1992. "Shocking Aspects of European Monetary Unification," Economics Working Papers 92-187, University of California at Berkeley.
- Fleming, J Marcus, 1971. "On Exchange Rate Unification," Economic Journal, Royal Economic Society, vol. 81(323), pages 467-488, September.
- Maria Demertzis & Andrew Hallett & Ole Rummel, 2000. "Is the European union a natural currency area, or is it held together by policy makers?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 136(4), pages 657-679, December.
- Gamber, Edward N & Joutz, Frederick L, 1993. "The Dynamic Effects of Aggregate Demand and Supply Disturbances: Comment," American Economic Review, American Economic Association, vol. 83(5), pages 1387-1393, December.
- Bayoumi, Tamim & Eichengreen, Barry, 1992. "Shocking Aspects of Monetary Unification," Department of Economics, Working Paper Series qt791143kp, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Edward E. Ghartey, 2003. "Monetary Policy And Deficits Financing In Jamaica," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 28(1), pages 81-99, June.
- Herbert G. Grubel, 1970. "The Theory of Optimum Currency Areas," Canadian Journal of Economics, Canadian Economics Association, vol. 3(2), pages 318-324, May.
When requesting a correction, please mention this item's handle: RePEc:eaa:eedein:v:8:y2008:i:8_1. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (M. Carmen Guisan)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.