Devaluation and economic stimulation: the Fiji economy post-coup

Abstract

The Fijian economy underwent a 33 per cent devaluation of its dollar against its major trading partners after the military coup in 1987. This move, as part of the broader structural adjustment package, was designed to boost the sluggish economy by promoting exports and discouraging imports. This study, which uses elasticities, indicates that the balance of trade will deteriorate in the short run. In the longer run, real net exports will respond positively to changes in relative prices and thus lead to a improvement in trade balance, if combined with other tools to promote private investment and raise aggregate demand.