Exchange rate and financial management: some lessons for and from Fiji

Abstract

This paper presents three findings. First, the January 1998 devaluation of 20 per cent of the Fiji dollar was long overdue and the result of financial mismanagement over the medium term?the crisis in East Asia was fortuitous in terms of timing of the devaluations. Second, devaluations can only be used sparingly; too frequent a use of this tool can render it ineffective and have serious side-effects on output and growth. Third, a policy package including the float of the Fiji dollar is necessary to get the economy on a sustainable growth path.