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Role of money in smaller Pacific Island countries

Jayaraman, Tiruvalangadu K. and Choong, C.K. (2012) Role of money in smaller Pacific Island countries. Economics Research International, 12 (1). pp. 1-9. ISSN 2090-2123

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Pacific island countries (PICs), which attained political independence, are open economies with very small manufacturing base and narrow range of exports of copra and tuna. They are highly dependent on imports ranging from food and mineral fuels to intermediate and capital goods and transport machinery. Four of the 14 PICs, namely Samoa, Solomon Islands, Tonga, and Vanuatu, have independent currencies with usual paraphernalia of central banks under fixed exchange rate regimes. Their financial sectors are small and with undeveloped money and capital markets. The nominal exchange rate as an anchor has served the four PICs well by keeping inflation low. The objective of the paper is to investigate whether money has played any significant part in output growth as well as determination of prices in PICs. The findings are that broad money (M2) and exchange rate have a long run as well as short-run casual relationship with both output and prices in all PICs.

Item Type: Journal Article
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Business and Economics (FBE) > School of Economics
Depositing User: Ms Shalni Sanjana
Date Deposited: 23 Jul 2012 21:25
Last Modified: 01 Aug 2016 10:57

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