Small Island Developing States (SIDS) are very different to other developing countries. Relative to GDP they have the highest levels of foreign trade and aid receipts of all developing countries. Remittances from abroad are a far more important source of income for SIDS, and some depend very...

The paper investigates the dynamic relationship between external and internal shocks and the current account in selected small islands developing states. External shocks, defined as terms of trade fluctuations, explain a significant proportion of the variation in the current account balances....