Abstract

This paper presents a theoretical equation that when used shows the impact that the foreign exchange reserves have on the overall health of an economy such as the case with Jamaica. The equation also has variables that demonstrate this case assuming no “official and unofficial” or “formal and informal” sectors. If there is a definitive split between both sectors so that the unofficial economy can make an impact on the formal economy, the splitting of the reserves can provide support for the “informal economy” as this sector can catalyze the formal economy potentially providing higher economic growth. It is shown through statistical data that the correlation can have an impact if the economy is split in two to show the positive relationship this can have on the Jamaican economy as a whole.

This work is licensed under a Creative Commons Attribution 4.0 License.