Inflation persistence: Implications for a monetary union in the Caribbean

In this paper we aim to shed some light on the potential for creating a monetary union in the Caribbean. We analyse the inflation rates for twelve countries using various time series methods. The results show that the inflation rates are mean reverting processes and that there is evidence of a convergence club in inflation rates within the area, which contradicts previous studies. Our contribution implies good news for the creation of a common central bank in the Caribbean.