University of Malta. Islands and Small States Institute
Abstract
Among the 14 Pacific island countries (PICs), which are members of the inter-
governmental organization known as Pacific Islands Forum, six countries have
independent currencies five of them, namely Fiji, Samoa, Solomon Islands, Tonga
and Vanuatu have fixed exchange rate regimes and the sixth country namely Papua
New Guinea has a flexible exchange rate regime. The other eight are dollarized
economies, having adopted one of the currencies of Australia, New Zealand and the
United States. This paper investigates whether the purchasing parity power theory
holds in regard to five countries under fixed exchange rate regimes. Our findings
show that long-run PPP hypothesis hold for all five PICs.peer-reviewe
