Abstract
This chapter analyzes the economic, financial and political factors that influence the long-run level of Jamaica’s current account balance. The issue is explored along the lines of the popular intertemporal model using the Bounds Test approach proposed by Brissimis et al. (Economic Change and Restriction 46 (3): 299–319, 2013). The results indicate that there is a long-run relationship between the current account-to-GDP ratio and changes in the Real Effective Exchange Rate (REER), political stability, openness, investment, external debt stock, corruption and foreign reserves. A depreciation of the REER and an increase in GDP growth contributes positively to the sustainability of Jamaica’s current account balance. Jamaica can improve its current account position in the long run by improving political stability and corruption control.
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Notes
- 1.
Short-term debt includes all debt having an original maturity of one year or less and interest in arrears on long-term debt. Data are in current US dollars.
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Haughton, A. (2017). Determinants of Current Account Imbalances. In: Developing Sustainable Balance of Payments in Small Countries. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-53031-4_3
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DOI: https://doi.org/10.1007/978-3-319-53031-4_3
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