Devaluation as a Policy Instrument for Caricom Countries
Publication Date
2015
Description
Caribbean Community (Caricom) governments are being urged to devalue their currencies in order to correct their balance of trade deficits and stimulate the industrial sector. This advice rests on the assumptions that the sum of the elasticities of demand and supply in Caricom countries is greater than one, that free trade prevails, and that the pass-through effects following the devaluation are complete. However, useful as the theory of devaluation may be for the industrial countries where it was developed, it is not necessarily an effective policy instrument within the context of most less developed countries because, in addition to other things, it ignores their colonial social and economic structures. I hypothesize that the colonial social and economic structures, which have persisted into the period of their political independence, help to render devaluation an ineffective policy instrument for Caricom countries.
Journal
Journal of Economic Issues
Volume
49
Issue
3
First Page
711
Last Page
729
Department
Economics
Link to Published Version
DOI
10.1080/00213624.2015.1071977
Recommended Citation
Griffith, Winston H.. "Devaluation as a Policy Instrument for Caricom Countries." Journal of Economic Issues (2015) : 711-729.