Interest rate determination in developing countries

Troy Lorde, Brian Francis, Kimberly Waithe and Timothy G. Taylor
Savings and Development Vol. 32(2008), No. 1, pp. 31-50

This paper seeks to determine nominal interest rates in five small developing countries - The Bahamas, Barbados, Guyana, Jamaica, and Trinidad and Tobago. The traditional Fisher equation augmented with the US nominal interest rate is employed. Results indicate the existence of a long-run relationship for The Bahamas, Jamaica (when the country’s exchange rate is floating), and Trinidad and Tobago. The Bahamian nominal interest rate moves one-for-one with the US interest rate, while for the others, the movement is greater than one-for-one. Fisher’s relation does not appear to be a suitable framework for determination of nominal interest rates in Barbados and Guyana.

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Issue: 2008 XXXII 1
Contributors: Francis, Brian   Lorde, Troy   Taylor, Timothy G.   Waithe, Kimberly   
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