THE IMPACT OF EXCHANGE VOTE ADJUSTMENT ON OUTPUT - JAMAICA 1960-90

Recent articles have argued that devaluations can have a short-term co ntractionary impact followed by an expansionary phase that may or may not result in net expansion in the long term. This paper extends recen t work on this issue by developing a specification that obviates the p roblems of spurious and inconsistent parameter estimation that may res ult in the absence of stationarity and cointegrating relationships. Th e findings suggest that exchange devaluations have had a neutral impac t on Jamaican output. It also examines the implicit assumption that wi thin the real exchange rate relationship the nominal exchange rate and the relative price effects are of equal weight, and finds this not to be the case.