Money Demand and Economic Liberalization in a Small Open Economy—Trinidad and Tobago

Stephen Dobson and Carlyn Ramlogan

Open Economies Review, 2001, vol. 12, issue 3, 325-339

Abstract: Economic liberalization creates potential instability in money demand. The introduction of liberalization in the early 1990s coincided with instability in the long-run demand for broad money (M2). OLS estimates confirm the presence of a structural break in the M2 model. Monetary policy should be based on a narrow definition of money. Moreover, the demand for money function must take explicit account of the openness of the economy. The results have important implications for policymakers in other Caribbean countries that are contemplating economic liberalization. Copyright Kluwer Academic Publishers 2001

Keywords: Caribbean; cointegration; demand for money; economic liberalization (search for similar items in EconPapers)
Date: 2001
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DOI: 10.1023/A:1011137624007

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