Monetary policy, central banking and economic performance in the Caribbean / Derick Boyd and Ron Smith.

Format:

Book

Author/Creator:

Boyd, Derick.

Contributor:

Smith, Ron.

Language:

English

Subjects (All):

Monetary policy--Caribbean, English-speaking.

Monetary policy.

Banks and banking--Caribbean, English-speaking.

Banks and banking.

Economic development--Caribbean, Englsih-speaking.

Economic development.

Physical Description:

vii, 143 pages : illustrations, map ; 26 cm

Place of Publication:

Kingston, Jamaica : University of the West Indies Press, 2011.

Summary:

Monetary Policy, Central Banking and Economic Performance in the Caribbean

Despite their common British colonial heritage, the twelve Caribbean economies examined in this book exhibit a wide variety of monetary regimes. These include a currency union, currency board, and fixed and floating exchange rate regimes which allow for a range of rules and discretionary-based monetary policies. Derick Boyd and Ron Smith trace the historical origins and evolution of this variety of Caribbean institutions and examine the effect of policy regime on economic performance, using theoretical economic analysis and several econometric techniques, which they explain in detail. Their conclusion is that better economic performance has benefited from an embedded tradition of conservative central banking, either hardwired, as in the case of a currency board, or throughdiscretionary policies, a tradition which seems to have been largely eroded in the resource-rich economies. Book jacket.

Contents:

1 Introduction to Monetary Policy in the Caribbean 1

2 Country Characteristics, Monetary Institutional Background, Central Banks and Economic Performance 8

2.1 Country Characteristics 9

2.2 Monetary Historical Institutional Background 13

2.2.1 The Early Monetary Foundations 14

2.3 Central Bank Characteristics 27

2.3.1 The Eastern Caribbean Central Bank 27

2.3.2 Central Bank of Barbados 28

2.3.3 Central Bank of the Bahamas 29

2.3.4 Central Bank of Jamaica 30

2.3.5 Central Bank of Trinidad and Tobago 30

2.3.6 Central Bank of Guyana 31

2.3.7 Central Bank of Belize 31

2.4 Comparative Country Performance 32

2.5 Conclusions 38

3 Monetary Policy Transmission Mechanisms in Developing Countries 42

3.1 Monetary Policy in Industrialized Countries 44

3.2 Objectives of Monetary Policy 46

3.3 Policy Instruments 47

3.4 Short-Run Transmission Mechanisms in Developing Countries 49

3.4.1 Interest Rate Channel 50

3.4.2 Exchange Rate Channel 50

3.4.3 Domestic Asset Price Channel 51

3.4.4 Credit Channel 52

3.5 Recent Empirical Developing Country Studies 53

3.6 Conclusions 57

4 The Data 59

4.1 Data Sources and Variables 60

4.2 The Country Data 61

4.3 Interpolation 62

4.4 Annual Data for External Balance Estimates 65

5 Econometric Methods and Issues 67

5.1 Unit Roots and Cointegration 68

5.2 Vector Autoregressions (VARs) 69

5.3 Identification 70

5.4 An Example 71

5.5 Impulse Response Functions 74

5.6 Cointegration 74

6 Estimating the Monetary Policy Effects on Inflation and Output: Closed Economy Unrestricted Vector Autoregression Modelling 77

6.1 Inflation Dynamics 78

6.2 Vector Autoregression 84

6.3 Money, Income and Prices 85

6.4 Conclusions 93

7 The Monetary Transmission Mechanism: Vector Error Correction Modelling and Cointegration 96

7.1 Cointegration Modelling 96

7.2 Conclusions 105

8 Caribbean External Balance Adjustment: The Marshall-Lerner Condition and J-Curve Effects 107

8.1 The Model 108

8.2 Investigating Balance of Trade Effects 110

8.3 Unrestricted VAR Estimations, Results and Interpretation 110

8.3.1 ADF Test for a Unit Root 110

8.3.2 Granger Block Non-causality Tests 111

8.3.3 Engle-Granger Test for Cointegration 112

8.4 Cointegrated VAR and VECM Estimations, Results and Interpretation 112

8.4.1 Johansen ML Tests for Number of Cointegrating Vectors 112

8.4.2 Johansen ML Estimates of the Cointegrating Vector and the Marshall-Lerner Condition 113

8.4.3 Generalized Impulse Responses and the J-Curve Effects 114

8.4.4 VECM Feedback Coefficients 115

8.5 Conclusions 117

9 Conclusions 119

9.1 The Substantive Objective 120

9.2 The Methodological Objective 122

9.3 Lessons and Policy Implications 125.

Notes:

Includes bibliographical references and index.

ISBN:

9789766402525

9766402523

OCLC:

733094503