A structural VAR model of the Fiji Islands

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Abstract

A four-dimensional Structural Vector Auto-regression (SVAR) model is applied to investigate the implications of fuel imports and devaluation policy on Fiji's current account deficits and economic growth. The paper finds that short-term deterioration of the current account is partly due to higher fuel imports. The impulse response analysis shows that a standard deviation fall in Fiji's REER leads to a J-curve type response in the current account within a short period. Furthermore, fuel import demand and devaluations are found to have negative, but transitory, effect on economic growth.

Original languageEnglish
Pages (from-to)238-244
Number of pages7
JournalEconomic Modelling
Volume31
Issue number1
DOIs
Publication statusPublished - Mar 2013
Externally publishedYes

Keywords

  • Current account
  • Devaluation
  • Economic growth
  • Fuel imports
  • Small Island Developing State
  • SVAR

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