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The Question of a Fixed Exchange Rate for Jamaica: An Answer from Theory and Practice

Date Published: 
April, 2009
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Whenever the value of the Jamaican dollar depreciates public debate ensues as to whether the country should change its currency regime to some form of fixed rate or dollarization. Examination of the exchange rate options for Jamaica reveals that regardless of the exchange rate regime, the absence of fiscal and monetary discipline creates macroeconomic instabilities that put pressure on the exchange rate. Before considering a fixed rate, therefore, the government must balance its budget, and establish a framework for fiscal management.