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Purchasing power parity in the eastern Caribbean currency union

Author

Listed:
  • Simmons, Walter
  • Aggarwal, Raj

    (John Carroll University, USA
    Kent State University, USA)

Abstract

There is increasing interest in regional trade, investment, and currency blocs, and in the optimal public policies for such blocs. There is also much managerial interest in the co-movement of exchange rates in a region. The Eastern Caribbean Currency Bloc is one of only three (and one of the longer lasting) multi-country common central banks in the world and is the only such bank in which member countries pool all their foreign reserves. While it is an important economic region especially for the United States, most studies of regional exchange rate relationships have not examined the nature of Caribbean exchange rates. This paper documents for the first time that purchasing power parity holds for each exchange rate and many real exchange rates are cointegrated and move in a bloc in the Eastern Caribbean region over the 1980s and 1990s.

Suggested Citation

  • Simmons, Walter & Aggarwal, Raj, 2004. "Purchasing power parity in the eastern Caribbean currency union," Journal of Developing Areas, Tennessee State University, College of Business, vol. 38(2), pages 155-169, January-M.
    • Handle: RePEc:jda:journl:vol.38:year:2004:issue2:pp:155-169
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    More about this item

    Keywords

    purchasing power parity; currency union; cointegration; exchange rates;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F15 - International Economics - - Trade - - - Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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