Growth Forecasts for Foreign Exchange Constrained Economies

DeLisle Worrell, Shane Lowe and Simon Naitram ()

MPRA Paper from University Library of Munich, Germany

Abstract: Insufficiency of foreign exchange may at times constrain the growth of small open economies which lack the domestic resources to produce import substitutes for their consumption, investment and input needs. This study explores the foreign exchange constraint in three small open Caribbean economies, using a structural model of the relationship of foreign exchange earnings and growth, and the economies’ openness to international markets. The model is used to evaluate the prospects of economic growth for these economies, based on the forecast availability of foreign exchange.

Keywords: Foreign currency constraint; exchange rate; small open economy (search for similar items in EconPapers)
JEL-codes: E58 F41 F47 (search for similar items in EconPapers)
Date: 2012-09
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