Demand and Supply Shocks in the Caribbean Economies: Implications for Monetary Union

Eric Pentecost and Paul Turner ()

The World Economy, 2010, vol. 33, issue 10, 1325-1337

Abstract: This paper uses the method of structural vector autoregressions to decompose movements of real output and prices into demand and supply innovations for four Caribbean economies: Barbados, Jamaica, Trinidad and Tobago, and Guyana. The aim of the analysis is to assess if these economies could feasibly form part of a Caribbean monetary union. Correlations between the demand and supply innovations are, however, typically low, indicating that monetary union may lead to greater stabilisation problems for these economies.

Date: 2010
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