Title: A monetary analysis of foreign exchange market disequilibrium in Fiji

Authors: Shabbir Ahmad; Abul Shamsuddin; Malcolm Treadgold

Addresses: University of Nizwa, P.O. Box 33, 11G-6, CEMIS, Postal Code 616, Birkat-al-Mauz, Sultanate of Oman. ' Newcastle Business School, University of Newcastle, Callaghan NSW 2308, Australia. ' School of Business, Economics and Public Policy, University of New England, Armidale, NSW 2351, Australia

Abstract: This paper evaluates a monetary model of foreign exchange market pressure in Fiji using the autoregressive distributed lag bounds testing methodology. The results suggest that if the monetary authorities in Fiji fix the exchange rate, they lose the ability to implement an independent monetary policy through control of central bank credit. Stronger monetary control is regained to the extent that pressure in the foreign exchange market is relieved through exchange rate movements rather than reserve movements.

Keywords: EMP; exchange market pressure; Fiji; monetary policy; ARDL; autoregressive distributed lag; error correction; bounds testing; exchange market disequilibrium; foreign exchange markets; exchange rates; central bank credit.

DOI: 10.1504/IJEPEE.2012.045436

International Journal of Economic Policy in Emerging Economies, 2012 Vol.5 No.1, pp.66 - 81

Received: 31 Mar 2011
Accepted: 04 Jul 2011
Published online: 15 Nov 2014 *

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