Economic policy and Caribbean economic performance

The Caribbean has seen a wide range of economic performance in the past 25 years, ever since the first oil crisis. Many countries have experienced steady growth with only occasional interruptions and income per head and the quality of life has significantly improved, as may be inferred from the Human development Report (UNDP, 1997). That list includes Aruba, Bahamas, Barbados, Bermuda, Belize, Cayman Islands, the Netherland Antilles and the Organisation of Eastern Caribbean States (OECS). However, the economies of other countries have contracted and living standards have fallen. The list is shorter – the Dominican Republic, Haiti, Jamaica, Guyana, Suriname and Trinidad and Tobago – but they account for a much larger share of population than the members of the first list. The obvious distinguishing characteristics of the better performers is a currency with a fixed value in terms of the U.S. dollar, and a selection of countries from the two groups, shown in Table 1, makes the point. Apart from the exchange rate strategy Caribbean economies are similar in every way. One of the things being explored in our empirical work is whether the exchange rate strategy is sufficient to explain the difference in economic performances, and this will be presented in the nature of a progress report.