The inflationary process in small open developing economies : a case study of the eastern Caribbean

Abstract

The main objective of this thesis is to investigate the causes of inflation in small open developing economies, using the Eastern Caribbean region as a case study. Orthodox inflation theory is viewed critically with respect to its applicability to the small open developing economy. Instead, a more appropriate model which stresses various structural elements is developed.

The model is specified and empirically tested. The main conclusions which are drawn from the empirical results are that the causes of inflation in the Eastern Caribbean can be primarily explained by rising import prices, domestic monetary conditions and, to a lesser extent, high rates of interest.