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Price Dynamics in the Eastern Caribbean
Author:
Rupa Duttagupta null

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and
Ms. Yan M Sun
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Series:
IMF Working Papers
Volume/Issue:
Volume 2008: Issue 090
Language:
English
Publication Date:
01 Apr 2008
DOI:
https://doi.org/10.5089/9781451869514.001
ISBN:
9781451869514
ISSN:
1018-5941
Pages:
21
Keywords:
WP; standard deviation; Purchasing power parity; inflation; currency union; ECCU exchange rate arrangement; ECCU country; price level; price indexes in the ECCU; deviation from PPP; price index data; common currency; Real exchange rates; Price indexes; Consumer price indexes; Caribbean
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The Eastern Caribbean Currency Union (ECCU) countries share a common currency, the EC dollar, which has been pegged to the U.S. dollar at the same rate for more than three decades. This paper examines the influence of the peg on ECCU price stability, and analyzes whether absolute Purchasing Power Parity (PPP) holds within the currency union. It shows that U.S. price stability has helped anchor price movement in the ECCU. As the same time, inflation in the ECCU is not entirely imported from the U.S., and has some domestic policy content. In addition, deviation from PPP within the ECCU can be attributed to persistent price dispersion of nontradables.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund