Abstract
This chapter analyzes the sustainability of the Balance of Payments (BOP) on aggregate by examining the dynamic relationship between the current account and capital account balance necessary to sustain economic activity. The results show that positive shocks to openness and domestic credit cause an increase in the optimal capital requirements needed to sustain economic activity over time. Corruption in Jamaica has a negative impact on the flow of foreign capital. Political stability and law and order have positive impacts on the level of capital flows. Meanwhile, an increase in real interest rate and crude oil prices and a depreciation of the local currency have negative impacts on capital flows.
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