Foreign exchange market pressure and transmission of international disturbances:: the case of Barbados, Guyana, Jamaica and Trinidad & Tobago

The Girton-Roper model of foreign exchange market pressure is applied to Barbados (1968-1993), Guyana (1964-1985), Jamaica (1964-1993), and Trinidad & Tobago (1967-1993) (years actually used in analysis in parentheses). Several versions of this model are estimated, tested and analysed so that either the monetarist or Keynesian model as well as the types of transmission of international disturbances can be identified. Contrary to some previous studies of these countries, strong support is found for a monetarist model of foreign exchange reserves and exchange rate movements in each country. In particular, the growth of US money supply effects exchange market pressure in Barbados and Guyana, while changes in US interest rates and the US inflation rate strongly influence exchange market pressure in Jamaica and Trinidad & Tobago.