The paper undertakes an empirical investigation of key macroeconomic factors affecting private investment in the South Pacific developing member countries. The study finds that instability in the real exchange rate had a sizeable adverse effect on private investment.

Fragility that periodically erupts into a full-blown financial crisis appears to be an integral feature of market-based financial systems in spite of the emergence of sophisticated risk management tools and regulatory systems. If anything, the increased frequency of modern crises underscores how...