Jamaica’s terms of trade: a problem of resource curse or Dutch disease?

The paper investigates Jamaican Terms of Trade, the persistence of shocks and the nature of the feedback process. Examination of the autoregressive feedback relationship for the period since 1960, suggested that feedbacks were significant but had finite persistence. However, when allowance was made for a structural break the autoregressive effect became insignificant and the behaviour of the NBTT showed no shock persistence. The implication drawn from these findings is that trade windfalls should be seen as temporary, so that a Jamaican policy response should seek to smooth the consumption effect. Government policy in the 1970’s acted as if the positive shock would be persistent and as a consequence created a virtual Dutch Disease scenario