Resorting to panel data investigation, this study seeks to test the causal relationships between current account imbalances and budget deficits in Pacific island countries. The study findings are that current account imbalances and budget deficits are cointegrated, although there is no long run...

The financial crisis in USA in late 2007 led to fall in economic activities in the industrialized countries. A global recession was triggered, with resulting decline in imports from Pacific island countries (PICs) and falling tourism earnings. Monetary policy options, which are available to six...