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With a fixed peg to the U.S. dollar for more than three decades, the tourism-dependent Eastern Caribbean Currency Union (ECCU) countries share a close economic relationship with the U.S. This paper analyzes the impact of the United States on ECCU business cycles and identifies possible transmission channels. Using two different approaches (the common trends and common cycles approach of Vahid and Engle (1993) and the standard VAR analysis), it finds that the ECCU economies are very sensitive to both temporary and permanent movements in the U.S. economy and that such linkages have strengthened over time. There is, however, less clear-cut evidence on the transmission channels. United States monetary policy does not appear to be an important channel of influence, while tourism is important for only one ECCU country.

The paper analyzes the determinants of banking spreads in Barbados, with a view to identifying the role of the monetary policy regime in explaining high spreads. The paper finds that interest rate spreads for Barbados are higher than would be suggested by its macroeconomic performance. Banking concentration and bank-specific variables, including bank size and provisions for nonperforming loans, do not have an important role in explaining variations in bank spreads. Rather, it appears that monetary policy variables, such as reserve requirements and capital controls, are the most important determinants of spreads.

Recent turbulence in global and Caribbean regional financial markets underscore the importance of reassessing the adequacy of international reserves held by the Eastern Caribbean Central Bank (ECCB). Using the Jeanne (2007) optimization framework, this paper finds that international reserves held by the ECCB are generally adequate for a variety of external current account and capital account shocks. However, the ECCB would be challenged in the event of moderate to severe deposit outflows.

This paper examines the situation of small developing states in the new international environment and provides some evidence on the adverse international transfer of income. It contrasts the position that the international community has taken on the major issues raised in the debate on the new international economic order two decades ago and concludes that the current international environment encourages an adverse transfer of income from developing to developed countries. The paper briefly reviews the experiences of the OECS economies with the changes in the international environment and outlines the strategic response of these countries. It argues that while individual small developing states can benefit if they become more competitive, collectively they stand to lose by competing away productivity gains and transferring the same to the developed countries. The discussion suggests that while it may not be possible or even desirable to turn back the tide of globalisation it would be necessary to put mechanisms in place to mitigate the worst effects of globalisation on developing economies. Esta presentación examina la situación de los pequeños estados en vía de desarrollo en el nuevo ambiente internacional y provee evidencia sobre la adversa transferencia internacional de ingresos. Pone en contraste la posición que la comunidad internacional ha adoptada en cuanto a asuntos importantes en el debate sobre el nuevo orden económico internacional hace dos décadas y concluye que el actual ambiente internacional alenta una adversa transferencia de ingresos de los paises en via de desarrollo a los paises desarrollados. La presentación revisa brevemente las experiences de las economías de la OECO con los cambios en el ambiente internacional y esboza la respuesta estratégica de estos paises. Razona que mientras que los pequeños estados individuales en via de desarrollo beneficien si estén más competitivos, puedan perder colectivamente al competer las ganancias de productividad y transferirlas a los dichos paises desarrollados. La discusión sugiere que aunque no esté posible o aún deseable hacer regresar la ola de globalización sería necesario poner en práctica mecanismos para mitigar los peores efectos de la globalización sobre las economías en vía de desarrollo. Ce document examine la situation de petits états en voie de développement dans le nouvel environnement international et fournit des évidences sur l'adverse transfert international de revenu. Il contraste la position adoptée par la communauté internationale il y a deux ans en ce qui concerne les questions principales dans le débat sur le nouvel ordre économiques international et conclut que l'environnement international actuel encourage un transfert adverse de revenu des pays en voie de développement aux pays développés. Le document examine en bréve les experiences des économies de l'OECO avec les changements dans l'environnement international et indique la réponse stratégique de ces pays. Il discute que pendant que les pétits états en voie de développement peuvent bénificier s'ils deviennent plus compétititifs, colectivement ils peuvent perdre en rivalisant les profits de productivité et transférer le mêmes aux pays développés. La discussion suggére que pendant que ce ne peut être possible ou même désiranble pour retourner la marée de globalisation, serait nécessaire mettre en place des mechanismes pour atténuer les plus mauvais effets de globalisation sur les économies en voie de développement.

This paper examines the likely effects of exchange rate changes in the Eastern Caribbean Currency Union, by estimating the transmission effects of exchange rate shocks, using a simple vector autoregressive model of the St. Lucian economy. The data does not reject the hypothesis that the effects of nominal effective exchange rate movements on the real economy would be small and short-lived. On the other hand, real effective exchange rate changes have small but permanent effects. However, given the openness of the economies a sustained depreciation in real effective exchange rates cannot be achieved without continuous nominal devaluations. Este trabajo examina los efectos que los cambios en las tasas pudieran tener en la Moneda del Caribe Oriental. Esto se logra evaluando los efectos de la transferencia de los impactos de la tasa de cambio, a través del modelo de Vector Simple Auto regresivo en la economía de Santa Lucia. La información recogida no rechaza la hipótesis de que el efecto nominal en el movimiento real de la economía sería mínimo y de corta duración debido a una tasa de cambio efectiva. Por otro lado, los cambios reales en la tasa de cambio tienen efectos mínimos permanentes. Por ende, en una economía abierta no se puede conseguir una depreciación sostenida sin una depreciación nominal continua. Cette présentation examine les effets que les variations du taux de change pourraient avoir sur la monnaie unique de la Caraïbe de l'Est. Pour ce faire, elle évaluera les effets de transmission des impacts du taux de change, en utilisant un modèle simple de vecteur autoprogressif de l'économie de Sainte Lucie. Les données n'excluent pas l'hypothèse selon laquelle les effets des mouvements nominaux effectifs du taux de change sur l'économie réelle seraient minimes et de courte durée. D'une autre part, des changements réels du taux de change ont des effets minimes mais permanents. Cependant, étant donné l'ouverture des économies une dépréciation durable ne peut être atteinte sans maintenir une dépréciation nominale.

Recent turbulence in global and Caribbean regional financial markets underscore the importance of reassessing the adequacy of international reserves held by the Eastern Caribbean Central Bank (ECCB). Using the Jeanne (2007) optimization framework, this paper finds that international reserves held by the ECCB are generally adequate for a variety of external current account and capital account shocks. However, the ECCB would be challenged in the event of moderate to severe deposit outflows

The main thesis of this paper is that it would be difficult for the ECCB countries to provide, individually, the ancillary services and an effective regulatory machinery for a financial services centre. Thus, the countries should try to adopt a common regulatory framework and a basic set of ancillary services. They could compete as individual locations on the basis of the natural attributes of the countries and the exclusive services they can offer. Failure to do this may result in one of the countries getting an unsavory reputation due to a lax regulatory framework with the rest of the area suffering from a contagion effect. A sub-theme of the paper is that the development of the domestic financial sector must keep pace with the off-shore sector to avoid dualism and provide mutually reinforcing growth. La thèse principale de ce document est de montrer qu'il sera difficile aux pays de la BCCE de fournir, individuellement, les services auxiliaires et un mécanisme réglementaire efficace pour un centre des services financiers. Donc les pays devraient essayer d'adopter un cadre règlementaire commun et un ensemble de base de services auxiliaires. Ils peuvent rivaliser entre eux sur la base de leurs caractères naturels et des services exclusifs qu'ils peuvent offrir. S'ils négligent de faire cela, un des pays risque d'avoir une réputation équivoque à cause d'un cadre règlementaire peu précis avec le reste de la région souffrant d'un effet contagieux. Dans un sous-titre, ce document traite du développement du secteur financier national qui doit aller de pair avec le secteur périphérique afin d'éviter le dualisme et fournir mutuellement une croissance renforcée. La tesis principal planteada por este documento es que sería dificil para los países del BCCO suministrar individualmente los servicios auxiliares y una eficiente maquinaria regulatoria para un centro de servicios financieros. Por lo tanto, los países deberían intentar de adoptar un marco regulatorio común y establecer los servicios auxiliares requeridos. Podrían competer como localidades individuales a base de las características naturales de los países, debido a la falta de un marco regulatorio débil y los demás del area sufrirían del efecto contagioso. Un tema secundario del documento indica que el desrrollo del sector financiero doméstico debe mantener el paso con el sector extranjero para evitar la duplicación y proveer crecimiento mutuamente reforzador.

With a fixed peg to the U.S. dollar for more than three decades, the tourism-dependent Eastern Caribbean Currency Union (ECCU) countries share a close economic relationship with the U.S. This paper analyzes the impact of the United States on ECCU business cycles and identifies possible transmission channels. Using two different approaches (the common trends and common cycles approach of Vahid and Engle (1993) and the standard VAR analysis), it finds that the ECCU economies are very sensitive to both temporary and permanent movements in the U.S. economy and that such linkages have strengthened over time. There is, however, less clear-cut evidence on the transmission channels. United States monetary policy does not appear to be an important channel of influence, while tourism is important for only one ECCU country

Recent turbulence in global and Caribbean regional financial markets underscore the importance of reassessing the adequacy of international reserves held by the Eastern Caribbean Central Bank (ECCB). Using the Jeanne (2007) optimization framework, this paper finds that international reserves held by the ECCB are generally adequate for a variety of external current account and capital account shocks. However, the ECCB would be challenged in the event of moderate to severe deposit outflows