June Edition of ER Features
An Analysis of Central Bank Intervention in the
Barbadian Foreign Exchange Market and Much More
The Central Bank of Barbados today launched the June edition of its refashioned Economic Review (ER).
The edition, available on the Bank’s website (http://www.centralbank.org.bb/) only, features a series of articles on topical issues. The topics covered in the June ER include:
Barbados’ manufacturing sector has declined significantly over the past 30 years, reflected in the industry’s falling contribution to GDP, employment, foreign exchange earnings and general economic development. The survival and growth of the Barbadian manufacturing sector beyond 2010 will require greater emphasis on research and development, focusing on goods with high value-to-weight ratios, intensification of the current focus on business and technology clusters, and enhancing technological absorptive capacity.
This paper provides a timely analysis of the Caribbean’s IBFS centres’ relative position in the international arena. We find that Caribbean IBFS centres, while important relative to other industries, are quite small in the global context and the region’s regulatory standards are on par with international recommendations.
Since the establishment of the fixed exchange rate regime between the Barbados and US dollar, foreign reserve management has become one of the main priorities of policy makers. As such, the paper “An Analysis of Central Bank Intervention in the Barbadian Foreign Exchange Market” by DeLisle Worrell, Michelle Doyle-Lowe and Mahalia Jackman, seeks to address this issue by analyzing the foreign exchange inter-bank market in Barbados and its role in achieving this goal. Under an efficient FX market, the interbank market serves as a gauge of FX surpluses or deficits, and also provides a measure of the performance of the FX market. The authors report there are some inefficiencies indicated by reduced offerings of surplus funds on the FX market during 2005-2009. Given this and other issues, the authors proposed two additional policy measure to augment current regulatory practices: (1) a reduced margin on the sale of FX to dealers from 3 ½ cents (BDS) to 2 ½ cents; and, (2) introduction of an additional requirement that dealers sell to the Central Bank 5 percent of the amount they purchase from the public.
The paper is primarily concerned with examining the impacts of the global economic and financial crisis on regional economies' economic growth, external current account balances and financial sector indicators, as well as discussing the corrective policies that were adopted by the governments of these countries.
This paper explores the determinants of commercial banks’ non-performing loans in Barbados, and conducts a stress test of the sector. The findings suggest that while loan delinquency is expected to remain relatively high in the near future, the banking system remains resilient to significant shocks in the real economy.
Three book reviews are also included in the document:
(Mallaby, Sebastian, More Money than God – Hedge Funds and the Making of a new Elite, NY: Penguin Press, 2010)
(Rahail Ali, 2008 - London: Globe Business Publishing Ltd)
(Caribbean Development Bank)
The ER provides a summary of the major socio-economic issues facing Barbados, selected research conducted by Bank staff and reviews of topical literature from around the world.
Economic Review - June 2011
June 21, 2011