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Researcher says gov't can't be trusted to manage pegged exchange rate

Published:Thursday | August 1, 2013 | 6:38 PM

The lead researcher on an exchange rate study, says the governments in countries like Jamaica cannot be trusted to manage a pegged exchange rate.

According to Dr Vanus James, a pegged exchange rate means the giving up of monetary policy.

Monetary policy involves controlling the supply of money for the purpose of promoting economic growth and stability and is usually undertaken by the central bank.

But James says given the corruption of regional governments such as Jamaica and Trinidad and Tobago they cannot be trusted to institute monetary controls in the absence of monetary policy.

James made the comments as he presented a report on a research looking at the relationship between Jamaica’s exchange rate regime and economic performance.

He has found that a floating exchange rate instead of a fixed one is the way to go for Jamaica.

According to him the best approach is to operate a managed float under conditions in which the policymaker tackles the problems of expensive imports and industrialisation.

The study was commissioned by the Edward Seaga Research Institute.

Seaga, a former Prime Minister and Finance Minister, has mooted a system of pegged exchange rate.


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