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This paper uses three methods to assess movements of real exchange rates in the ECCU over time. First, the purchasing power parity hypothesis is tested and then used to provide a benchmark for equilibrium real exchange rates in the region. Second, a fundamentals-based equilibrium real exchange rate approach is used to explore sources of real exchange rate fluctuations in ECCU countries. And third, a macroeconomic balance approach is used to estimate equilibrium current account or current account "norms". The main finding of these analyses is that there is little evidence of overvaluation of the EC dollar. Furthermore, this paper contributes to the literature by analyzing the distinctive impact of tourism in determining real exchange rates through the wealth effect induced by tourism-driven increases in terms of trade and productivity.

Finance --- Business & Economics --- International Finance --- Foreign exchange rates --- Monetary unions --- Common currencies --- Currency areas --- Currency unions --- Optimum currency areas --- Exchange rates --- Fixed exchange rates --- Flexible exchange rates --- Floating exchange rates --- Fluctuating exchange rates --- Foreign exchange --- Rates of exchange --- Rates --- Currency question --- Money --- Exports and Imports --- Foreign Exchange --- Industries: Hospital,Travel and Tourism --- Current Account Adjustment --- Short-term Capital Movements --- Sports --- Gambling --- Restaurants --- Recreation --- Tourism --- Currency --- International economics --- Hospitality, leisure & tourism industries --- Real exchange rates --- Real effective exchange rates --- Purchasing power parity --- Current account balance --- Balance of payments --- United States