A Currency Union for the Caribbean

35 Pages Posted: 28 Jan 2006

See all articles by DeLisle Worrell

DeLisle Worrell

Central Bank of Barbados; Retired

Date Written: February 2003

Abstract

The experiences of Caribbean Economic Community countries show that exchange rate depreciation in these countries is inflationary, and that, while changes in the relative prices of tradables may affect exports, tourism, and imports, nominal exchange rate changes have no predictable effect on those relative prices. Under these circumstances, economic literature indicates that a fixed exchange rate regime is optimal, and Caribbean countries with (quasi-) currency boards have been successful in maintaining durable exchange rate pegs. Commitment to a currency board is a potentially vital step in achieving a currency union for the Caribbean.

Keywords: Currency Board, Dollarization, Caribbean

JEL Classification: F36, F42, F15

Suggested Citation

Worrell, DeLisle, A Currency Union for the Caribbean (February 2003). IMF Working Paper No. 03/35, Available at SSRN: https://ssrn.com/abstract=879110

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