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The Monetary Approach To The Balance Of Payments: An Application To Barbados

Author

Listed:
  • MICHAEL HOWARD

    (University of the West Indies, Cave Hill Campus, Barbados, P. O. Box 64, St. Michael, Barbados)

  • NLANDU MAMINGI

    (University of the West Indies, Cave Hill Campus, Barbados)

Abstract

This paper examines the monetary approach to the balance of payments in Barbados, a small open economy with a fixed exchange rate system. We use an error correction mechanism (ECM) approach which shows that the monetary approach applies to Barbados. Such an ECM approach has not been previously employed in other related studies. Our analysis has implications for monetary policy since it confirms that excessive credit expansion leads to balance of payments deficits in fixed exchange rate systems, and the monetary authorities need to hold high levels of reserves in small open economy systems to protect the exchange rate.

Suggested Citation

  • Michael Howard & Nlandu Mamingi, 2002. "The Monetary Approach To The Balance Of Payments: An Application To Barbados," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 47(02), pages 213-228.
    • Handle: RePEc:wsi:serxxx:v:47:y:2002:i:02:n:s0217590802000511
    DOI: 10.1142/S0217590802000511
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    Citations

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    Cited by:

    1. Ghilous Azeddine & Ziat Adel, 2023. "Balance of Payments as a Monetary Phenomenon: An ARDL Bounds Test Method for Algeria," Folia Oeconomica Stetinensia, Sciendo, vol. 23(1), pages 64-86, June.
    2. Aline Coudouel & Stefano Paternostro, 2006. "Analyzing the Distributional Impact of Reforms : A Practitioner’s Guide to Pension, Health, Labor Markets, Public Sector Downsizing, Taxation, Decentralization, and Macroeconomic Modeling, Volume 2," World Bank Publications - Books, The World Bank Group, number 7041.
    3. Essama-Nssah, B., 2005. "The poverty and distributional impact of macroeconomic shocks and policies : a review of modeling approaches," Policy Research Working Paper Series 3682, The World Bank.
    4. Behrman, Jere R., 2009. "Analyzing the Distributional Impact of Reforms, Volume Two: A Practitioner's Guide to Pension, Health, Labor Market, Public Sector Downsizing, Taxation, Decentralization, and Macroeconomic Modeling. A," Journal of Pension Economics and Finance, Cambridge University Press, vol. 8(3), pages 396-397, July.
    5. Wright, Allan S & Craigwell, Roland C & RamjeeSingh, Diaram, 2011. "Exchange rate determination in Jamaica: A market microstructures and macroeconomic fundamentals approach," MPRA Paper 33436, University Library of Munich, Germany.
    6. KHAN, Muhammad Arshad, 2008. "Long-Run And Short-Run Dynamics Of Foreign Exchange Reserves Flows And Domestic Credit In Pakistan," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 5(1), pages 61-78.

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