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Convergence of Inflationary Shocks: Evidence from the Caribbean


  • The authors gratefully acknowledge Karl Taylor, Gurleen Popli and two anonymous referees for valuable comments on a previous draft. The usual disclaimer applies. Juan Carlos Cuestas gratefully acknowledges the financial support of the MINECO (Ministerio de Economía y Competitividad, Spain) research grant ECO2011-30260-C03-01.


In this paper, we aim to shed some light on the inflation dynamics in the Caribbean. We analyse the inflation rates for twelve countries using various time series methods. The results show that the inflation rates are mean reverting processes and that there is evidence of a convergence club in inflation rates within the area, which contradicts previous studies. Our contribution implies a high degree of similarity in the dynamics of our target countries' inflation rates.