Crime, Confidence, and Credit: Macroeconomic and Financial Linkages in a Small Tourism-Dependent Economy

This paper examines the relationship between recorded crime outcomes and macroeconomic and financial performance in Barbados using newly assembled quarterly data covering 2017Q1 to 2024Q4. The analysis combines descriptive evidence with dynamic time-series regressions to assess whether crime measures are associated with tourism demand, private credit growth, labour-market conditions, and financial stability indicators. Particular attention is given to the composition of crime, distinguishing between property offences, serious violence, firearm-enabled crime, and crimes against visitors.

Descriptive results show a structural decline in total recorded crime to a trough in 2021, followed by partial recovery, alongside a marked shift in offence composition. Exposure-adjusted visitor-crime rates improve in the post-COVID period relative to pre-COVID benchmarks. To move beyond simple co-movement, the paper estimates autoregressive distributed lag models with seasonal controls and explicit treatment of the COVID regime break. The econometric results indicate that increases in serious violence are associated with subsequent declines in tourist arrivals, while firearm-enabled crime is associated with lower tourism receipts. Property and violent crime measures are also linked to weaker subsequent private credit growth. In contrast, relationships with unemployment and non-performing loan ratios are not robust once regime shifts are controlled for.

The findings are most consistent with a risk-environment channel, whereby sustained levels of high-salience crime affect economic confidence and financing conditions rather than producing short-lived mechanical effects. The results support a targeted policy approach that prioritises firearm-enabled and serious violent offences as macro-relevant risks, treats property crime as a cost-of-doing-business constraint, and manages tourism safety as an exposure-sensitive deployment challenge. The paper concludes by outlining data and measurement improvements necessary for stronger causal evaluation of policing effectiveness and macroeconomic outcomes.