Central Bank of Barbados
 
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Research Working Papers 2000

These are draft research papers prepared by the economists in the Research Department of the Central Bank of Barbados. Copies are produced for distribution in the publication Working Papers published annually by the Bank. Expressed permission is required from the authors before they can be quoted, or reproduced.
  • BANKING STRATEGIES AND PERFORMANCE : The case of banks in CARICOM
    by Anthony Birchwood
    IN:  Working Papers 2000 pp 1- 14
    1. Banking.  2. Caribbean.

  • DUALISM, UNEMPLOYMENT AND GROWTH
    by Patrice Borda and Frederic Gavrel
    IN: Working Papers 2000 pp 15 - 20
    1. Employment.  2. Unemployment.  3. Labour.  4. Econmic modelling.

Using a dual representation of the economy, we develop a model that attempts to explain economic take-off.  The model takes into account two kinds of externalities that spread from the modern sector into the traditional one.  On the one hand a static extornality (Marshall type economy scale) and on the other hand, a dynamic technology externality.  We show that the economy can be characterised by two configurations: and underdevelopment equilibrium and a biased-development equilibriunm with a higher level of unemployment.  If the development of the mordern sector decreases employment, then the take-off is accomplished by an increase in umemployment.

  • ECONOMIC RESILIENCE WITH AN EXCHANGE RATE PEG : The Barbados experience, 1985-1999
    by DeLisle Worrell, Harold Codrington, Roland Craigwell and Kevin Greehidge
    IN: Working Papers 2000 pp 23 - 41
    1. Exchange rates.  2. Economic conditions.  3. Economic crises.  4. Barbados.

  • EXCHANGE RATE REGIMES AND ECONOMIC PERFORMANCE IN THE CARIBBEAN
    by Sarath Rajapatirana and Dave Seerattan
    IN: Working Papers 2000 pp 43 - 64
    1. Exchange rates.  2. Caribbean.

  • THE GAINS FROM TRADE LIBERALISATION: : The case of the manufacturing sector in Barbados
    by Denny Lewis-Bynoe, Jennifer Griffith and Winston Moore
    IN: Working Papers 2000 pp 167 - 179
    1. Manufacturing.  2. Trade liberalisation.  3. Trade policy.  4. Barbados.

Historically, the absence of competition in developing countries has resulted in highly concentrated domestic industries that do not fully exhaust economies of scale, and as a result are characterised by high cost and low productivity.  Yet, these industries continue to prosper behind the high walls of protection offered.  Liberalisation is expected to reverse this trend but at what cost.  Like many of its regional counterparts, Barbados has already instituted some liberalisation measures as part of their World Trade Organisations (WTO) commitments and further liberalisation is planned for subsequent years.  The paper examines the impact of the changes to the existing trade regime in Barbados by utilising an import demand framework and offers some useful insights for the Caribbean region.  The results of this analysis indicate that the manufacturing industry could encounter tremendous price competition, which given the inelasticity of demand for imported manufactured goods, evident in most small island economies, could compromise the future survival of these industries.  As a result, to effectively compete in the new global trading environment, regional industries will need to reorganise production processes to increase efficiency. KEY WORDS:   Trade Liberalisation , Trade Policy, Manufacturing

  • GOVERNMENT FACILITATION OF MONOPOLY OPERATIONS IN S CHANGING WORLD
    by Ken Vital
    IN: Working Papers 2000 pp 65 - 78
    1. Monopolies.  2. Electricity.  3. Government.  4. OECS.  5. ECCB.  6. Caribbean.

This paper surveys the likely rationale which lead to the use of legislation to facilitate and regulate monopoly operations in the member territories of the ECCB, it discusses the ways  in which the environment has been changing, investigate the current and potential efficiency impacts of maintaining a monopoly regime and make recommendations where appropriate.  These will be done using the specific case of the monopoly provision of electricity.

  • THE IMPACT OF REGULATORY MEASURES ON COMMERCIAL BANKS' PROFITABILITY: : The Barbadian Case
    by Nicole Brown
    IN: Working Papers 2000 pp 115 - 129
    1. Bank supervision.  2. Regulation.  3. Commercial banks.  4. Barbados.

  • THE IMPACT OF SMALL SIZE AND OPENNESS ON FISCAL POLICY AND  PERFORMANCE
    by Kevin Woods
    IN: Working Papers 2000 pp 181 - 195
    1. Small open economies.  2. Fiscal policy.

  • THE IMPACT OF VAT ON TOURISM IN BARBADOS
    by Jennifer Griffith
    IN: Working Papers 2000 pp 197 - 209
    1. VAT.  2. Value Added Tax.  3. Fiscal policy.  4. Government revenue.  5. Tourism.  6. Hotel room rates.  7. Caribbean.  8. Barbados.

This paper attempts to analyse the impact of the three-year old value-added tax (VAT) on the tourism sector in Barbados.  The results show that on average the VAT has been passed on to the tourist  in the form of higher hotel room rates.  This may be due to the fact that while the VAT on hotel accommodation was levied at 7.5% as opposed to 15% imposed on most other goods and services, this concession represents a 50% increase from the previous 5% sales tax.  Thus hoteliers, who prior to the VAT are already less competitive than their Caribbean counterparts, are now more disadvantaged by this new tax policy.  The paper therefore calls for Government to recognise the fragility of the tourism sector and strive towards implementing policies that will enhance the industry's future competitiveness.

  • INTERNATIONAL TRADE AND COMPARATIVE ADVANTAGE IN THE CARIBBEAN
    by Denny Lewis-Bynoe and Professor Allan Webster
    IN: Working Papers 2000 pp 79 - 103
    1. International trade.  2. Exports.  3. CARICOM.  4. Caribbean.

This paper provides an empirical analysis of patterns of export specialisation by, in particular, member countries of CARICOM and in the Caribbean more widely.  It focuses on the identification of important similarities and dissimilarities in the pattern of comparative advantage and international trade amongst these countries.

Empirical evidence is presented based on a consistent set of data foe trade in goods in 1994.  Analysis is conducted mainly by means of indices of revealed comparative advantage and of export similarity and is conducted in several stages.  Firstly, patterns of export specialisation are assessed for CARICOM countries and key similarities and  dissimilarities are identified.  Secondly, this analysis is extended to other Caribbean countries and other key similarities and dissimilarities between CARICOM and the rest of the Caribbean are identified.  Finally, the degree of similarity between CARICOM exports and those of other regions of the world is analysed.

The paper finds that there is a high degree of diversity in comparative advantage and export specialisation between different countries in CARICOM and between CARICOM and the rest of the Caribbean.  Whilst this diversity means that neither the CARICOM nor the Caribbean is a homogeneous entity in terms of international trade there also remains sufficient similarities to suggest that there is indeed common ground between Caribbean countries.

The paper uses these results to draw conclusions about the prospects for welfare gains arising from regional integration in the Caribbean.  In particular, the finding of diversity of common elements, which is suggestive of competitive force, provides grounds for some cautious optimism
  • LONG-TERM PRIVATE SECTOR INVESTMENT INFLOWS AND THEIR  IMPACT ON BARBADIAN EXPORTS AND IMPORTS FROM 1970-1998
    by Trevor Campbell
    IN: Working Papers 2000
    1. Private sector Investments.  2. Exports.  3. Imports.  4. Trade.  5. Barbados.

  • MEASURING FINANCIAL DEVELOPMENT IN BARBADOS: 1978-1998
    by Nola Bynoe-Mayers and Roland Craigwell
    IN: Working Papers 2000 pp 105 - 114
    1. Financial development.  2. Measurement.  3. Barbados.

This paper constructs a new index for measuring financial development in Barbados that is based on key characteristics of the financial system.  The results indicate that Barbados has improved its level of financial development during the period 1978 to 1998 and this may be attributed to an increase in the availability of new financial products and a more open financial system.  Also, it was found that he Monetary Authority has utilised most of the monetary instruments available worldwide throughout the period.  Of major concern is the under development of the market structure and the financial liberalization segments of the financial system.

  • THE RELATIONSHIP BETWEEN COMMERCIAL BANK'S INTEREST RATES AND LOAN SIZES : Evidence from a small open economy
    by Winston Moore and Roland Craigwell
    IN: Working Papers 2000 pp 211 - 228
    1. Interest rates.  2. Commercial banks.  3. Loan size.  4. Panel models.  5. Barbados.

Traditional finance theory argues that as the size of a loan obtained from a financial institution increases, the interest rate on that loan rises to accommodate the increased risk associated with the loan.  However, utilising firm-level data of the Barbadian banking industry, it is observed that for all six banks studied especially the small ones, the smaller the loan's size, the greater the interest rate applied, and vice versa.  Using a fixed effect panel data framework, this study also shows that he interest rate differences among loan sizes can be mainly explained by the demand for smaller loans, administrative expenses and  monetary policy as set by the Central Bank.

  • SECOND GENERATION MODELS OF CURRENCY CRISES : An application to Trinidad and Tobago
    by Christopher Crowe
    IN: Working Papers 2000 pp 131 - 142
    1. Exchange rates.  2. Trinidad & Tobago.

This paper analyses the government's choice of exchange rate regime from a political economy perspective.  Building on the theoretical insights of second-generation exchange rate crisis models, the paper presents a modified model in which the choice to devalue or maintain a currency anchor in the face of shocks to the real economy in explicitly modeled within a maximising framework.

The paper attempts to fit such a model tot he experience of the Trinidad and Tobago economy over the twenty-five years.  Trinidad and Tobago presents a useful example because it has devalued on a number of occasions and in response to various real stocks.  Having estimated the coefficients of the model, the estimated ex ante probability of devaluation is ascertained for each period.

Generally speaking , the model performs well.  Parameter estimates all have the 'correct' sign, although not all are statistically significant.  On two of the three devaluation occasions, the estimated probability reaches a maximum at the point if devaluation.  hence political economy factors appear to have played a significant role in the determination of exchange rate policy in Trinidad and Tobago.

  • SOME MONETARY IMPLICATIONS FOR PUBLIC DEBT MANAGEMENT IN THE CARIBBEAN
    by Daniel Boamah and Kevin Greenidge
    IN: Working Papers 2000 pp 143 - 154
    1. Debt management.  2. Public debt.  3. Caribbean.

  • TAXATION AND FEMALE LABOUR SUPPLY IN JAMAICA : The econometrics of  nonlinear budget constraints
    by Dillon Alleyne and Alfred Francis
    IN: Working Papers 2000 pp 155 - 179
    1. Taxation.  2. Female workers.  3. Labour supply.  4. Jamaica.

  • TOURISM : A successful Caribbean development strategy
    by Hudson Husbands and Adrian Carter
    IN: Working Papers 2000 pp 235 - 247
    1. Tourism.  2. Economic development.  3. Caribbean.

  • THE TYPES OF SKILLS AND EDUCATION NEEDED FOR A NEW INDUSTRIAL STRATEGY IN BARBADOS
    by Heather Cole
    IN: Working Papers 2000 pp 229 - 234
    1. Trade liberalisation.  2. Education.  3. Industrialisation.  4. Globalisation.  5. Barbados.  6. Caribbean.

  • WHY BARBADOS NEEDS A  SECURITIES AND EXCHANGE COMMISSION
    by Virginia Mapp
    IN: Working Papers 2000 pp 249 - 254
    1. Securities exchange.  2. Capital markets.  3. Stock exchange.  4. Barbados.

 

 
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