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A Currency Union for the Caribbean

  • DeLisle Worrell
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    The experiences of Caribbean Economic Community countries show that exchange rate depreciation in these countries is inflationary, and that, while changes in the relative prices of tradables may affect exports, tourism, and imports, nominal exchange rate changes have no predictable effect on those relative prices. Under these circumstances, economic literature indicates that a fixed exchange rate regime is optimal, and Caribbean countries with (quasi-) currency boards have been successful in maintaining durable exchange rate pegs. Commitment to a currency board is a potentially vital step in achieving a currency union for the Caribbean.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/35.

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    Length: 35
    Date of creation: 01 Feb 2003
    Date of revision:
    Handle: RePEc:imf:imfwpa:03/35
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    1. Calvo, Guillermo A & Vegh, Carlos A, 1995. "Fighting Inflation with High Interest Rates: The Small Open Economy Case under Flexible Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 49-66, February.
    2. Andrew K. Rose & Eric van Wincoop, 2001. "National Money as a Barrier to International Trade: The Real Case for Currency Union," American Economic Review, American Economic Association, vol. 91(2), pages 386-390, May.
    3. Peter Isard & Hamid Faruqee, 1998. "Exchange Rate Assessment; Extension of the Macroeconomic Balance Approach," IMF Occasional Papers 167, International Monetary Fund.
    4. Robert S. Pindyck, 1990. "Irreversibility, Uncertainty, and Investment," NBER Working Papers 3307, National Bureau of Economic Research, Inc.
    5. Peter Robson, 1993. "The New Regionalism and Developing Countries," Journal of Common Market Studies, Wiley Blackwell, vol. 31(3), pages 329-348, 09.
    6. Ricardo Hausmann & Michael Gavin & Carmen Pagés-Serra & Ernesto H. Stein, 1999. "Financial Turmoil and the Choice of Exchange Rate Regime," IDB Publications (Working Papers) 4128, Inter-American Development Bank.
    7. DeLisle Worrell, 2000. "Monetary and Fiscal Coordination in Small Open Economies," IMF Working Papers 00/56, International Monetary Fund.
    8. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear Of Floating," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 379-408, May.
    9. Masters, William A. & Ianchovichina, Elena, 1998. "Measuring exchange rate misalignment: Inflation differentials and domestic relative prices," World Development, Elsevier, vol. 26(3), pages 465-477, March.
    10. Carmen M. Reinhart & Vincent Raymond Reinhart, 2002. "What Hurts Emerging Markets Most? G3 Exchange Rate or Interest Rate Volatility?," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 133-170 National Bureau of Economic Research, Inc.
    11. Ian W. Marsh & Stephen Tokarick, 1994. "Competitiveness Indicators; A Theoretical and Empirical Assessment," IMF Working Papers 94/29, International Monetary Fund.
    12. Rosensweig, Jeffrey A., 1988. "Elasticities of substitution in Caribbean tourism," Journal of Development Economics, Elsevier, vol. 29(1), pages 89-100, July.
    13. Ricardo Hausmann & Michael Gavin & Carmen Pagés-Serra & Ernesto H. Stein, 1999. "Financial Turmoil and Choice of Exchange Rate Regime," Research Department Publications 4170, Inter-American Development Bank, Research Department.
    14. Holder, Carlos & Worrell, DeLisle, 1985. "A model of price formation for small economies : Three Caribbean examples," Journal of Development Economics, Elsevier, vol. 18(2-3), pages 411-428, August.
    15. Hjalmar Böhm & Michael Funke, 2001. "Does the Nominal Exchange Rate Regime Matter for Investment?," CESifo Working Paper Series 578, CESifo Group Munich.
    16. Reinhart, Carmen & Reinhart, Vincent, 2001. "What hurts most?: G-3 exchange rate or interest rate volatility," MPRA Paper 14098, University Library of Munich, Germany.
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