Eonomic integration among Caribbean countries: Evidence from purchasing power parity, 1980-2000

摘要

The Caribbean is an important economic region especially for the United States yet it is an under-studied area. This paper is the first to examine the stochastic nature and co-movements of real exchange rates in the Caribbean for the recent two-decade period for evidence of purchasing power parity and currency blocs. This paper clearly documents that purchasing power parity holds in the Caribbean region even for the mostly fixed rate period of the 1980s; and it certainly holds for the 1990s. In addition, there seems to be clear evidence of co-movement among the three real exchange rates in the Caribbean in the 1990s after the economic reforms around 1990. Because of the importance of exchange rate changes for cross-border trade and investment, these findings have important public policy and managerial implications.