The growth of the tourist industry in the Caribbean is a rich and varied success story. For the most part it has been a story of private enterprise, with the providers of tourism services pricing their services in line with the quality of service on offer, and, for a majority of countries,...

This chapter recommends an alternative to the standard approach to economic stabilisation and growth policy for small open economies. The standard view, reflected in the analyses of the IMF, other international institutions, most think tanks and the media, is that a combination of credible...

This paper assesses how various types of financial risk such as credit risk, market risk, and liquidity risk affect banking stability in the ten countries that joined the European Union most recently, and eight neighboring countries. It also examines how the quality of supervisory standards may...

A banking system module is incorporated into the Central Bank of Barbados`s multisectoral macroeconomic forecasting model, and a medium-term forecast is generated for bank capitalization, profitability, liquidity and nonperforming loans. Stress tests are performed for the first year of the...

This paper is a first analysis of daily transactions in the foreign exchange market of Barbados, a small open economy that has had an unchanged peg to the U.S. dollar for over 30 years. As a result of the credibility of the peg, we expect that capital flows will respond to differentials between...

A survey of the financial systems of Caribbean countries reveals systems dominated by banks, with services widely available. Jamaica is the only country to have experienced a financial crisis. The paper describes recent improvements in the regulatory framework, and examines factors, which affect...

Statistical measures of the volatility of exchange rates, interest rates, and stock prices are estimated for a number of countries. Periods of high volatility are identified and compared with periods of financial difficulty. The results indicate that GARCH models of volatility could be...

This paper is concerned with the design of institutional arrangements for low inflation in small open economies. In the real world of information asymmetries, uncertain expectations and changeable preferences, it is not enough to create an autonomous and publicly accountable central bank. In...

The experiences of Caribbean Economic Community countries show that exchange rate depreciation in these countries is inflationary, and that, while changes in the relative prices of tradables may affect exports, tourism, and imports, nominal exchange rate changes have no predictable effect on...

This paper suggests a strategy designed to make best use of the available quantitative techniques of financial sector assessment. It incorporates early warning systems, financial sector forecasts, stress tests for systemically important financial institutions, interbank contagion analysis, and...