Jamaica initially fixed its currency to the USD but then underwent a long period of various exchange rate arrangements and gradual reforms to monetary arrangements, with increasing focus on price stability, increasing use of indirect instruments and preparations for a move to formal inflation targeting.

Years Targets and attainment Classification
1974-6 long-standing fix of currency to GBP, peg switched to USD 1973; range of commercial banks, all foreign-owned or related, near-banks and other financial institutions; central bank has power to use various measures but relies mainly on liquid asset requirements and credit ceilings, while interest rates are largely market-determined; heavy central bank financing of budget deficits augmented exchange rate fix AERF
1977-2017 April 1977 to May 1978 dual exchange rate, with ‘basic’ rate for official and other essential transactions initially at previous fixed rate and depreciated ‘special’ rate for other transactions, both rates marginally adjusted at intervals; May 1978 rates merged with large depreciation, and with commitment to depreciate further by small amounts each month for a year, followed by hard peg to USD under which real effective appreciation resumes; continued central bank financing of budget deficits and large balance of payments deficits lead to short-lived stabilisation efforts from mid-1978; new government from 1980 aims at cut in role of public sector and gradual but stronger stabilisation, but both prove difficult; 1982 new government securities (which cannot be used to fulfil liquid asset ratio) to absorb excess liquidity; May 1983 return of dual forex market, late 1983 reunification, followed by short-lived controlled forex auction market and by somewhat freer auction early 1984; late 1984 auction market freed, exchange rate floats; 1984/5 fiscal tightening, credit ceilings and interest rate rises bring short-term monetary slowdown, but monetary financing of deficits resumes in 1986; late 1985 OMOs in form of auctions of central bank CDs, forex intervention to reverse some depreciation followed by peg to USD (with auction continuing); from mid-1986 to mid-1988 CD auctions are set price instead of set quantity; rediscount facilities reinstated, liquidity support facility (providing securitised short-term lending) introduced, interest rates become more important; growing central bank losses feed into rise in domestic credit; major hurricane late 1988, strong national (and international) policy response; new government 1989 maintains stabilisation and structural reform efforts; changes to liquid asset requirements, more emphasis on OMOs but credit ceilings revived late 1989; mid-1989 depreciation despite central bank efforts with restored credit ceilings, late 1989 suspension of auction and new USD peg, but forex flows diverted to forward and parallel markets and pressure continues; 1990 interbank exchange rate system, 1991 forex liberalisation, interbank rate moves closer to parallel rate; 1990 floor to interest rate on savings deposits ended, 1991 abolition of credit ceilings, from 1993 reserve requirements rarely varied; 1994 central bank CDs phased out, growth of treasury bills and other government securities; central bank relies on OMOs (mainly repos and reverse repos) in OTC markets operated from 1994 by primary dealers; 1994 further opening of forex market to competition; 1995 monetary policy focus switched to reducing inflation, with monetary base as intermediate target and exchange rate broadly stabilised, but large public sector deficits require very high OMOs which lead to high real interest rates and real appreciation; 1995-7 financial (bank) crisis: interventions, partial nationalisations, restructuring; 1998-2002 reserve requirements equalised and gradually reduced; from late 1990s authorities resist IMF pressure for sharp adjustment of (managed) exchange rate; strong fiscal stabilisation 2000, but debt/GDP ratio very high, partly from costs of financial crisis; 2002 attempts to lengthen term and reduce cost of government debt; forex and financial near-crisis 2003, avoided by sharp monetary and fiscal consolidation; severe hurricanes 2004-5; mid-2000s policy continues to involve very tight monetary conditions but varying budget deficits, with high debt and high interest payments (which vary with fluctuations in exchange rates as well as interest rates), while authorities resist increasing pressures from IMF for much sharper fiscal consolidation to reduce debt ratio; GFC brings about GDP declines 2008-9, currency depreciation and rising budget deficits, and leads to plans for more decisive fiscal consolidation and debt exchange to reduce interest bill/lengthen term of debt, with latter realised but former not; 2012 authorities resist IMF call for (more) sharp depreciation and favour more gradual fiscal consolidation; late 2012 hurricane with severe adverse economic effects leads to stronger and broadly supported reform programme 2013 including major fiscal tightening, more exchange rate flexibility and further debt exchange; 2016 debt markets re-opened after debt exchanges; central bank preparing, but so far without commitment, to move to inflation targeting, first mooted 2012; evidence 2016 that policy rate responds to inflation but not output gap, and is poorly transmitted to other interest rates; statistical database long poor but much improved by end of period loosely structured discretion LSD

Selected IMF references: RED 1973 pp56-61, 63-4; RED 1974 pp50; SR 1974 pp6-9, 14; RED June 1978 pp25-7, 36; RED October 1978 pp23, 51; RED 1982 pp36; SR 1982 pp1-2, 7, 12-14, 16-17; RED 1984 pp45-6; SR 1984 pp9-14, 20-1; RED 1985 pp34, 39, 50; RED 1987 pp34, 39, 53; RED 1988 pp30-3, 37; RED 1989 pp27-32; SR 1989 pp21-2; RED 1990 pp25, 27-8; SR 1990 pp4-11; SR 1992 pp4-5; RED 1993 pp11-12, 14-15, 22; SR 1995 pp8-9; RED 1996 pp2-3, 4-5, 11-14, 36-8, 69; SR 1997 p10; SI 1998 pp17-24, 29; SR 1998 pp7-12; SR 1999 pp4-6, 13-14, 17-18; SR 2002 p7; SR 2003 pp16-17; SI 2004 pp48-54; SR 2004 pp7-9; SR 2006 pp15-16; SR 2008 pp9-13; SR 2010 pp4-5; SR 2012 pp9-10, 16, 18; SR 2014 pp4-6, 18; SR 2016 pp12-13, 14, 25; SR 2018 pp4-6, 13-14, 22.

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