Efficacy of fiscal and monetary policies in the South Pacific Island countries: some empirical evidence

Jayaraman, Tiruvalangadu K. (2001) Efficacy of fiscal and monetary policies in the South Pacific Island countries: some empirical evidence. The Indian Economic Journal, 49 (1). pp. 63-72. ISSN 0019-4662

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Abstract

Since their independence in the early and mid-seventies, the South Pacific Island Countries (SPICs) have been pursuing fiscal and monetary policies for promoting growth and diversification of their economies. Their fiscal policies in the past were influenced by plentiful supply of foreign savings. Annual budgets were supported by grants from former colonial rulers for both recurrent expenditures such as wages and salaries and capital expenditures for investment in physical infrastructures (Jayaraman - 1995a, Jayaraman 1996a and Jayaraman 1997). The impact of fiscal and monetary policies on economic growth in SPICs appears to be uncertain, as there have been a number of factors, which are beyond the control of the decision-makers. The negative effects of physical limitations such as small resource base, long distances from external markets and limited export possibilities are now being overcome by increased efforts towards diversification into new and emerging economic activities of service-oriented nature, including tourism and off-shore finance centres. However, the single most important constraint to steady growth has been the annual occurrence of cyclones. Under these circumstances, it would be of interest to undertake an empirical investigation of the impact of fiscal and monetary policies on growth, which is the objective of this paper. The data limitations in terms of both availability and completeness have restricted the choice of the island nations to four: Fiji, Samoa, Tonga and Vanuatu. The paper is organised into three sections. The first section discusses some recent developments in the selected four SPICs, which would serve as a background for the analysis; the second section outlines the model adopted for the empirical analysis and presents the results; and the last section offers some conclusions and examines policy implications.

Item Type:	Journal Article
Subjects:	H Social Sciences > HG Finance
Divisions:	Faculty of Business and Economics (FBE) > School of Economics
Depositing User:	Ms Mereoni Camailakeba
Date Deposited:	17 Nov 2001 21:45
Last Modified:	01 May 2012 01:53
URI:	http://repository.usp.ac.fj/id/eprint/2785

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