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Growth Forecasts for Foreign Exchange Constrained Economies

Worrell, DeLisle and Lowe, Shane and Naitram, Simon (2012): Growth Forecasts for Foreign Exchange Constrained Economies.

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Abstract

Insufficiency of foreign exchange may at times constrain the growth of small open economies which lack the domestic resources to produce import substitutes for their consumption, investment and input needs. This study explores the foreign exchange constraint in three small open Caribbean economies, using a structural model of the relationship of foreign exchange earnings and growth, and the economies’ openness to international markets. The model is used to evaluate the prospects of economic growth for these economies, based on the forecast availability of foreign exchange.

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