Ghartey, Edward E
Author Affiliation, Ana.
Economics; Faculty of Social Sciences
A dynamic analysis of purchasing power parity in Jamaica
Social and Economic Studies
Date of Publication
Seasonal cointegration of the long-run purchasing power parity (PPP) is tested for Jamaica. Found that none of the variables have unit roots in their residual at frequencies (-) = 1/4, 1/2 and 3/4 of a cycle (2 tt); albeit, all of the series, are non-stationary at frequency 0. The normal exchange rate and relative prices, and the Jamaican consumer price index (CPI) and its dollar value of the U.S. CPI are cointegrated. Predicts that a complete float of the exchange rate will result in over 40 percent devaluation a year, and about 11 percent devaluation every quarter. The country's terms of trade will deteriorate by 60 per cent a year, with no improvement in a quarter.....