 Exchange rate regimes and monetary autonomy: Empirical evidence from selected Caribbean countriesRoland Craigwell, Kevin Greenidge and Tracy Maynard MPRA Paper from University Library of Munich, Germany Abstract: This paper uses the error correcting methodology to investigate how pegged and non-pegged exchange rate regimes in a set of Caribbean countries affect the closeness of the relationship between changes in a base country rate and the local rate. This interest rate parity condition is subjected to effects arising from capital controls and common shocks related to inflation and external debt. The results support the standard theory that peg countries (like Barbados) follow the base country interest rate more closely than the managed float or flexible rate economies (such as Trinidad and Tobago and Jamaica). In addition, the paper supports the open economy macroeconomic policy trilemma proposition that only two of the following goals – stability in the exchange rate, national independence in monetary policy and free capital mobility- can be achieved simultaneously. Keywords: Exchange rates; Monetary policy; Error correcting mechanisms (search for similar items in EconPapers) Published in Central Bank of Barbados Economic Review 2.36(2009): pp. 22-36 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:33437 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
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