Exchange rate misalignment in selected Caribbean countries


Created 21 Jul, 2003
Categories Working Papers
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This paper investigates whether the real effective exchange rates (REER) for Barbados, Jamaica and Trinidad over the period 1970-2001 are over- or under-valued. A long run cointegration regression of the REER and five fundamental variables [are] estimated, and the degree of over- or under-valuation is obtained by comparing the actual REER to the equilibrium REER value. The paper finds that the actual REER for Barbados, Jamaica are currently above the equilibrium REER, while Trinidad and Tobago's REER is below the level it would have been in equilibrium.

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