"Shocking" aspects of globalization and Pacific Island countries : a study of Vanuatu

The financial and banking crises in USA in late 2007 led to a decline in economic activities in the industrialized countries, triggering a world-wide recession since then. The ongoing global economic downturn has brought into sharp focus the subject of macroeconomic interdependence of Pacific island countries, for further examination. The impact of recessionary effects has not been uniform as the degree of global interdependence varies amongst PICs. This paper deals with the case of Vanuatu, which has been able to withstand the onslaught of recession, because of the economic resilience, nurtured by recent prudent fiscal and monetary policies. The paper adopts a VAR model to determine the impact of global and regional shocks on Vanuatu.