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Exchange rate and output fluctuations in the small open economy of Mauritius

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  • Bastos, Fabiano
  • Angelo Divino, Jose

Abstract

The authors estimate a VAR and compute generalized impulse response to analyze the joint dynamics of four key macroeconomic variables in the small open economy of Mauritius. Results suggest that nominal exchange rate and interest rate have limited ability to impact output growth over the medium-run. Large error bands hinder analysis of the inflation output trade-off, but evidence points to a weak relationship in the short run as well. These findings are used to shed some light into the policy response to the current worldwide economic slowdown affecting Mauritius.

Suggested Citation

  • Bastos, Fabiano & Angelo Divino, Jose, 2009. "Exchange rate and output fluctuations in the small open economy of Mauritius," Policy Research Working Paper Series 5065, The World Bank.
    • Handle: RePEc:wbk:wbrwps:5065
    as

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    References listed on IDEAS

    as
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    5. Junsoo Lee & Mark C. Strazicich, 2001. "Break Point Estimation and Spurious Rejections With Endogenous Unit Root Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(5), pages 535-558, December.
    6. Bagliano, Fabio C. & Favero, Carlo A., 1999. "Information from financial markets and VAR measures of monetary policy," European Economic Review, Elsevier, vol. 43(4-6), pages 825-837, April.
    7. Pierre Perron & Serena Ng, 1996. "Useful Modifications to some Unit Root Tests with Dependent Errors and their Local Asymptotic Properties," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(3), pages 435-463.
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    10. repec:bla:obuest:v:63:y:2001:i:5:p:535-58 is not listed on IDEAS
    11. Mr. Arvind Subramanian & Mr. Devesh Roy, 2001. "Who Can Explain The Mauritian Miracle: Meade, Romer, Sachs or Rodrik?," IMF Working Papers 2001/116, International Monetary Fund.
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    Cited by:

    1. Rasaki, Mutiu Gbade & Malikane, Christopher, 2015. "Macroeconomic shocks and fluctuations in African economies," Economic Systems, Elsevier, vol. 39(4), pages 675-696.

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    Keywords

    Debt Markets; Emerging Markets; Economic Stabilization; Currencies and Exchange Rates; Economic Theory&Research;
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