Monetary Policy And Deficits Financing In Jamaica
A 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.
Volume (Year): 28 (2003)
Issue (Month): 1 (June)
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