Prakash, Kushneel A. and Maiti, Dibyendu S. (2013) Oil price shocks and effectiveness of devaluation in Fiji. UNSPECIFIED. (Unpublished)
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Domestic inflation tends to crowd out the effectiveness of devaluation mainly due to the increased import costs. But, if the inflation is driven by external oil price shocks, it has an ambiguity on the same. This would depend on the relative influence of oil price on the domestic and foreign price of the major trading partners. The current paper would like to empirically investigate the effect of oil price on the exchange rate movement and the resultant trade balance for the case of Fiji. The issue of oil price has been, so far, ignored in such analysis undertaken in Fiji, because of negligible export share of manufacturing activities of the country. Since oil price could influence the domestic price through the increased transport and other costs, it can still negate the effect of devaluation. We find that the domestic inflation has been influenced by the oil price shocks from early 2000 and this has partially limited the potential benefits of the recent devaluation. As a result,the transformation process from importable to
exportable production has been weak and working
against the objective of devaluation in Fiji in recent
years. This further contributes to the inflationary
process of the economy and puts the economy into a
dilemma of choosing between devaluation and the fight
against it.
| Item Type: | Other |
|---|---|
| Uncontrolled Keywords: | conference, presentation |
| Subjects: | H Social Sciences > HB Economic Theory |
| Divisions: | Faculty of Business and Economics (FBE) > School of Economics |
| Depositing User: | Kushneel Prakash |
| Date Deposited: | 02 Apr 2014 00:19 |
| Last Modified: | 05 Jul 2016 23:29 |
| URI: | https://repository.usp.ac.fj/id/eprint/7259 |
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