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The purpose of this paper is to forecast Fiji's exports and imports for the period 2003‐2020.

To achieve the goal of this paper, the autoregressive moving average with explanatory variables (ARMAX) model was applied. To this end, the paper drew on the published export demand model and the import demand model of Narayan and Narayan for Fiji.

The paper's main findings are: Fiji's imports will outperform exports over the 2003‐2020 period; and current account deficits will escalate to be around F$934.4 million on average over the 2003‐2020 period.

Exports and imports are crucial for macroeconomic policymaking. It measures the degree of openness of a country and it signals the trade balance and current account balances. This has implications for inflation and exchange rate. By forecasting Fiji's exports and imports, the paper provides policy makers with a set of information that will be useful for devising macroeconomic policies.

The purpose of this paper is to examine the monetary policy transmission mechanism for the Fiji Islands using a structural vector autoregressive (SVAR) model for the period 1975 to 2005.

The SVAR model investigates how a monetary policy shock – defined as a temporary and exogenous rise in the short‐term interest rate – affects real and nominal macro variables; namely real output, prices, exchange rates, and money supply.

The results suggest that a monetary policy shock statistically significantly reduces output initially, but then output is able to recover to its pre‐shock level. A monetary policy shock generates inflationary pressure, leads to an appreciation of the Fijian currency and reduces the demand for money. The paper also analysed the impact of a nominal effective exchange rate (NEER) shock (an appreciation) on real output and found that it leads to a statistically significant negative effect on real output.

The findings of this study should be of direct relevance to the research and policy work undertaken at the Reserve Bank of Fiji.

For a small economy, such as Fiji, where monetary policy is key to sustainable macroeconomic management, this is the first paper that undertakes a dynamic analysis of monetary policy transmission. The paper uses time series data over three decades and builds a structural VAR model, rooted in theory. This paper will be of direct relevance to the Reserve Bank of Fiji. The approach and model proposed will also be useful for applied monetary policy researchers in other developing countries where inflation rate targeting is a key element of the monetary policy setting.

This paper aims to examine the export‐led growth hypothesis for Fiji and Papua New Guinea (PNG).

The paper investigates the export‐led growth hypothesis for Fiji and PNG who have been facing dismal economic growth performances over the last couple of decades.

Findings of the study suggest that for Fiji there is evidence of export‐led growth in the long‐run, while for PNG there is evidence of export‐led growth in the short‐run.

The findings of this paper have important messages for policy makers given that export sectors in both countries investigated are underdeveloped due mainly to a sustained period of political instability.

This paper aims to estimate a disaggregated import demand model for Fiji using relative prices, total consumption, investment expenditure and export expenditure variables for the period 1970 to 2000.

The recently developed bounds testing approach to cointegration to test for a long run relationship is used, while the autoregressive distributed lag model is used to estimate short run and long run elasticities. These methodologies are shown to perform well in small sample sizes, particularly given that the bounds F‐test critical values for small sample sizes generated by Narayan in 2004 and 2005 are used.

Amongst the key results it is found: a long run cointegration relationship among the variables when import demand is the dependent variable; and import demand to be inelastic and statistically significant at the 1 per cent level with respect to all the explanatory variables in both the long‐run and the short‐run.

The disaggregated import demand model estimated here provides a complete picture of the determinants of Fiji's imports. This model can be used by Fijian policy makers to draw pertinent policies and forecast import demand for Fiji.

Understanding the relationship between government revenue and government expenditure is important from a policy point of view, especially for a country like Fiji, which is suffering from persistent budget deficits. The aim of this paper is to investigate the relationship between government revenue and expenditure for Fiji.

The Johansen test for cointegration and Granger causality test are used to conduct the empirical analysis.

The key findings are that: government revenue and government expenditure in both the aggregate and disaggregate sense are cointegrated; in the short‐run government expenditure Granger causes government revenue in an aggregate sense, departmental expenditure Granger causes aggregate revenue, and there is bidirectional causality running between government expenditure and customs duties; and in the long‐run there is evidence of fiscal synchronization, implying that expenditure decisions are not made in isolation from revenue decisions.

This fiscal synchronization has not been able curb the current account deficit in Fiji. Moreover, the confirmation of the spend‐tax attitude of the government does not bode well for the level of investments and skilled human capital in Fiji as this may perpetuate tax increases in the future. Given that the Fiji Government is currently trying to rein in the escalating level of fiscal deficit, it is an opportune time for them to engage in extensive expenditure reforms.

The findings of this paper should allow policy makers to make informed decisions. Furthermore, the paper is different from others because apart from examining the revenue and expenditure in an aggregate sense, it also considers the different components of revenue and expenditure.

This paper aims to delineate the short‐ and long‐run relationships between savings, real interest rate, income, current account deficits (CADs) and age dependency ratio in Fiji using cointegration and error correction models over the period 1968‐2000.

The recently developed bounds testing approach to cointegration is used, which is applicable irrespective of whether the underlying variables are integrated of order one or order zero. Given the small sample size in this study, appropriate critical values were extracted from Narayan. To estimate the short‐ and long‐run elasticities, the autoregressive distributed‐lag model is used.

In the short‐ and long‐run: a 1 per cent increase in growth rate increases savings by over 0.07 and 0.5 per cent, respectively; a 1 per cent increase in the CAD reduces savings rate by 0.01 and 0.02 per cent, respectively; and the negative coefficient on the real interest rate implies that the income effect dominates the substitution effect, while in the short‐run the total effect of the real interest rate is positive, implying that the substitution effect dominates the income effect.

This paper makes the first attempt at estimating the savings function for the Fiji Islands. Given that Fiji's capital market is poorly developed, the empirical findings here have direct policy relevance.

Under the fixed exchange rate regime Fiji's currency, which is pegged to a basket of currencies of its major trading partners, has been experiencing severe pressures. The purpose of this paper is to study annual exchange market pressure (EMP) over a 31‐year (1975‐2005) period and attempt to determine the factors behind EMP.

The paper employs the autoregressive distributed lag (ARDL) bounds testing procedure, which is applied to a multivariate model covering four variables, namely EMP in index numbers, and budget deficit, domestic credit to private sector and external debt, all the three expressed as percentages of gross domestic product. Additionally, an uncertainty variable is added to the regression analysis with a view to finding out whether political uncertainty has been responsible for speculative attacks on currency. Existence of a cointegration vector is then investigated. It is then followed by Granger‐causality tests in an error‐correction model with view to exploring the short‐ and long‐term relationships between the variables.

The study findings are: there existed a long‐run relationship between EMP and budget deficit, domestic credit to private sector, external debt and political uncertainty; and EMP was positively related to budget deficit, domestic credit to private sector and external debt as well as speculative pressures exercised by political uncertainty.

The empirical study on EMP in the South Pacific Island countries and in Fiji in particular is the first of its kind. The paper is expected to promote further interest in the studies of currencies of small island countries.

The purpose of this paper is to construct an econometric model of the determinants of private investment with a particular focus on the impact of democracy on investment.

The first step was to econometrically derive the long‐run elasticities; then to modify the Fiji computable general equilibrium (CGE) model to incorporate the investment function. Also the econometrically derived long run elasticities in the CGE model were used.

It was found that democracy has a positive and statistically significant impact on private investment in Fiji. The paper's simulation of Fiji becoming a fully democratic country on investment and other macroeconomic fundamentals, based on a CGE model, reveals that real gross domestic product and real national welfare increase by around 0.01 and 0.05 per cent, respectively; government savings and revenue performance improves; there is a trade balance surplus; and both private consumption and disposable income increase by around 0.05 and 0.12 per cent, respectively.

This is the first study that uses a CGE model to examine the impact of democracy, via investment, on other macroeconomic fundaments. No other study is known to have modelled democracy in a CGE framework.

There are several studies that investigate evidence for mean reversion in stock prices. However, there is no consensus as to whether stock prices are mean reverting or random walk (unit root) processes. The goal of this paper is to re‐examine mean reversion in stock prices.

The authors use five different panel unit root tests, namely the Im, Pesaran and Shin t‐bar test statistic, the Levin and Lin test, the Im, Lee, and Tieslau Lagrangian multiplier test statistic, the seemingly unrelated regression test, and the multivariate augmented Dickey Fuller test advocated by Taylor and Sarno.

The main finding is that there is no mean reversion of stock prices, consistent with the efficient market hypothesis.

One issue not considered by this study is the role of structural breaks. It may be the case that the efficient market hypothesis is contingent on structural breaks in stock prices. Future studies should model structural breaks.

The findings have implications for econometric modelling, in particular forecasting.

This paper adds to the scarce literature on the mean reverting property of stock prices based on panel data; thus, it should be useful for researchers.