MODELLING THE BINDING CONSTRAINTS TO ECONOMIC GROWTH IN BARBADOS

Date: 12/29/2014
Author(s): MAMINGI, NLANDU*; LAWRENCE, NKENGE; LACORBINIéRE, JASON; (2014)

Created 29 Dec, 2014
Categories Working Papers
Views: 2833
Print
Share
The paper utilises a growth diagnostics framework and the results of the 2010 World Bank Enterprise Surveys (WBES) to empirically determine the binding constraints to economic growth in Barbados. In addition, using data spanning the period 1980-2012, cointegration techniques are applied to an autoregressive distributed lag (ARDL) model, with the view of examining whether the binding constraints identified in the WBES are validated in the more formal model of endogenous growth. The results of the growth diagnostics exercise indicate: (i) access to finance, (ii) tax rates, (iii) the cost of telecommunications, (iv) the cost of electricity, and (v) an inadequately educated workforce are the major binding constraints to economic growth in Barbados. Furthermore, the results of the ARDL model confirm the following impacts of the binding constraints: interest rates and tax rates in the short and long runs, the cost of telecommunications in the long run, and the cost of electricity in the short run. In addition, natural disasters are an impediment to economic growth. These results have important policy implications.

Binding Growth Constraints.pdf (0 Bytes)
Copyright 2020 by Central Bank of Barbados