The cost of financial capital: Evidence from selected Caribbean countries

Abstract

Does a strong commitment to an exchange rate peg reduce the cost of financial capital to less developed countries? We use a sample of twelve Caribbean countries to examine the impact that the Eastern Caribbean Currency Union (ECCU), a currency board/monetary union, has in lowering the cost of borrowing to its members. Results from estimations on individual and pooled annual data from 1976–1999 indicate that membership in the ECCU, in addition to other policy variables, significantly reduces the cost of financial capital.

Citation

Augustine, C. and Beck, S. (2005), "The cost of financial capital: Evidence from selected Caribbean countries", International Journal of Development Issues, Vol. 4 No. 1, pp. 83-100. https://doi.org/10.1108/eb045850