Understanding this new era in our economy

The recent public debate on the depreciation of the Jamaican dollar has been ardent and, in some cases, desperate.

Even well-informed stakeholders have become confused, the most surprising being the members of the Economic Programme Oversight Committee (EPOC), who are now arguing that “the transition from a managed float to a free float should be managed”.

That runs counter to its previous support for a floating exchange rate regime.

The country should not forget that immense political muscle was used to get the rate to a real and sustainable level and then resist the temptation to undervalue it again.

This is a new era in Jamaica’s march to economic independence. The country has commendably clawed its way out of the deepest part of the economic pit we dug for ourselves over several decades. We have achieved stability that was previously unimagined; unemployment is at a record low, inflation is on par with our main trading partners; our exchange rate is real and sustainable; international reserves are at record levels; interest rates are low and falling; and our current account is largely in balance.

We are finally able to abandon the failed policy of high interest rates and the squandering of international reserves to prop up the exchange rate.

Making the exchange rate flexible made it possible to lower inflation and drop interest rates. Now the country is seeing more protection of the buying power of the poor, higher investment and, as we already pointed out, lower unemployment.

http://www.jamaicaobserver.com/editorial/understanding-this-new-era-in-our-economy_141733