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.
STRATEGIES AND PERFORMANCE : The case of banks in CARICOM
Working Papers 2000 pp 1- 14
UNEMPLOYMENT AND GROWTH
Borda and Frederic Gavrel
IN: Working Papers 2000 pp 15 -
4. Econmic modelling.
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
We show that the economy can be characterised by two
configurations: and underdevelopment equilibrium and a
biased-development equilibriunm with a higher level of
If the development of the mordern sector decreases
employment, then the take-off is accomplished by an increase
RESILIENCE WITH AN EXCHANGE RATE PEG : The Barbados
Worrell, Harold Codrington, Roland Craigwell and Kevin
IN: Working Papers 2000 pp 23 -
rates. 2. Economic
conditions. 3. Economic
crises. 4. Barbados.
RATE REGIMES AND ECONOMIC PERFORMANCE IN THE CARIBBEAN
Rajapatirana and Dave Seerattan
IN: Working Papers 2000 pp 43 -
rates. 2. Caribbean.
GAINS FROM TRADE LIBERALISATION: : The case of the
manufacturing sector in Barbados
Lewis-Bynoe, Jennifer Griffith and Winston Moore
IN: Working Papers 2000 pp 167
2. Trade liberalisation.
3. Trade policy.
by Ken Vital
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
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
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
As a result, to effectively compete in the new global
trading environment, regional industries will need to
reorganise production processes to increase efficiency.
Trade Liberalisation , Trade Policy, Manufacturing
IN: Working Papers 2000 pp 65 -
4. OECS. 5. ECCB.
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.
by Nicole Brown
IMPACT OF REGULATORY MEASURES ON COMMERCIAL BANKS'
PROFITABILITY: : The Barbadian Case
IN: Working Papers 2000 pp 115 -
supervision. 2. Regulation.
3. Commercial banks.
by Kevin Woods
IMPACT OF SMALL SIZE AND OPENNESS ON FISCAL POLICY AND
IN: Working Papers 2000 pp 181 -
1. Small open economies.
2. Fiscal policy.
by Jennifer Griffith
IMPACT OF VAT ON TOURISM IN BARBADOS
IN: Working Papers 2000 pp 197 -
2. Value Added Tax.
3. Fiscal policy.
4. Government revenue.
6. Hotel room rates.
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
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.
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
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.
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.
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
by Trevor Campbell
PRIVATE SECTOR INVESTMENT INFLOWS AND THEIR
IMPACT ON BARBADIAN EXPORTS AND IMPORTS FROM
IN: Working Papers 2000
1. Private sector
Investments. 2. Exports.
4. Trade. 5. Barbados.
Bynoe-Mayers and Roland Craigwell
FINANCIAL DEVELOPMENT IN BARBADOS: 1978-1998
IN: Working Papers 2000 pp 105 -
1. Financial development.
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
Moore and Roland Craigwell
RELATIONSHIP BETWEEN COMMERCIAL BANK'S INTEREST RATES AND
LOAN SIZES : Evidence from a small open economy
IN: Working Papers 2000 pp 211 -
1. Interest rates.
2. Commercial banks.
3. Loan size.
4. Panel models.
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.
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.
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.
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
political economy factors appear to have played a significant
role in the determination of exchange rate policy in Trinidad
Boamah and Kevin Greenidge
MONETARY IMPLICATIONS FOR PUBLIC DEBT MANAGEMENT IN THE
Papers 2000 pp 143 - 154
1. Debt management.
2. Public debt.
Alleyne and Alfred Francis
AND FEMALE LABOUR SUPPLY IN JAMAICA : The econometrics of
nonlinear budget constraints
IN: Working Papers 2000 pp 155 -
2. Female workers.
3. Labour supply.
Husbands and Adrian Carter
: A successful Caribbean development strategy
Papers 2000 pp 235 - 247
2. Economic development.
by Heather Cole
TYPES OF SKILLS AND EDUCATION NEEDED FOR A NEW INDUSTRIAL
STRATEGY IN BARBADOS
IN: Working Papers 2000 pp 229 -
1. Trade liberalisation.
BARBADOS NEEDS A SECURITIES
AND EXCHANGE COMMISSION
IN: Working Papers 2000 pp 249 -
1. Securities exchange.
2. Capital markets.
3. Stock exchange.