Some independent thinking about the Jamaican dollar exchange rate

I really ought to be doing something else on the 56th anniversary of Jamaica’s independence, but having gone out just after dawn to play a little golf and now trying to wrestle with crime-solving puzzles while watching series related to Inspector Morse, I thought I’d share some thinking I did over the weekend. They’re contained in the Twitter threads below (click on the boxes and the full threads should appear), and I hope are totally clear. If not, sorry. It’s mainly arithmetic and a bit of logic at work. That said, an annoying unknown about prices like the exchange rate is that we have some good guides about what it should be, but there’s no guarantee that in a market that has relatively free movement of demand and supply we can understand why the price is where it is. At the end of the day, financial analysts will tell you that the rate is that which has cleared the market, and it tend to stay at a certain level while participants are happy with that. That said, politicians hate being associated with negative news so always start to freak out when the country’s exchange rate is going in ‘the wrong direction’. So, I am really interested in whether the current Finance Minister, Dr. Nigel Clarke can keep his somewhat cerebral posture about the exchange rate, notably that the exchange rate is a shock absorber that allows other real variables (like output and employment) to remain less affected.

If you understand none of this, be blessed, and carry on your life regardless, saving me a piece of cake to go with the lovely cup of tea that you continue to enjoy 🙂

Author: Dennis G Jones (aka 'The Grasshopper')

Retired International Monetary Fund economist. My blog is for organizing my ideas and thoughts about a range of topics. I was born in Jamaica, but spent 30 years being educated, living, and working in the UK. I lived in the USA for two decades, and worked and travelled abroad, extensively, throughout my careers and for pleasure. My views have a wide international perspective. Father of 3 girls. Also, married to an economist. :)