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Publication Type
Journal Article
UWI Author(s)
Author, Analytic
Ghartey, Edward, E
Author Affiliation, Ana.
Department of Economics
Article Title
Exchange market pressure and optimal foreign exchange regime in Jamaica
Medium Designator
n/a
Connective Phrase
n/a
Journal Title
Social and economic studies
Translated Title
n/a
Reprint Status
Refereed
Date of Publication
2002
Volume ID
51
Issue ID
2
Page(s)
49-62
Language
n/a
Connective Phrase
n/a
Location/URL
n/a
ISSN
n/a
Notes
n/a
Abstract
Employs the exchange market pressure (EMP) model to identify an appropriate foreign exchange regime for Jamaica, a small open economy. The empirical findings suggest that expansion in world prices, income and domestic credit result in the appreciation of the Jamaican dollar, and an outflow of international reserves. The estimates of the EMP indicate that the monetary authorities absorb EMP by either allowing the exchange rate to depreciate or through the loss of international reserves. However, similar estimates obtained by using international reserves decomposed from the EMP as a regress and strongly suggest that a fixed exchange rate is optimal. Sterilization bias tests also indicate that the Bank of Jamaica's monetary policy is dependent on global monetary environment. Thus, the current managed float regime which leans toward the fixed exchange rate end of the exchange rate band is optimal.....
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