Working Papers

Prosperity and the Exchange Rate Regime in Small Open Economies

2016: This paper explores the difference in perception between economists and ordinary folk about the importance of stable exchange rates for small open economies. Small open economies everywhere are preoccupied with exchange rate stability, whereas most economists believe that exchange rates should be managed flexibly to maintain competitiveness or allowed to float freely. To most non-economists it is fairly obvious that countries with more stable exchange rates are more prosperous. Our paper finds empirical evidence in support of that view.

Size, Structure and Devaluation

2016: Exchange rate devaluations have been used by economies around the world in an attempt to enhance their external price competitiveness. This paper evaluates the efficacy of this strategy in small-island developing states. We classify countries around the world into two broad categories, large or small according to population, land area and economic size, proxied by GDP. We compare large countries with small countries according to the following dimensions: the country’s share of world export markets, the diversity of exports of goods and services, the elasticity of import demand for consumer and producer goods, and the sensitivity of prices and wages to exchange rate changes. Using these results, we assess the efficacy of devaluation as a competitive strategy in small states as well as in larger countries.

Barbados International Competitiveness

2014: This study investigates the competitiveness of the Barbadian economy relative to its regional counterparts. The analysis incorporates the relative rankings of the Global Competitiveness Report 2013-2014, relative market shares and productivity gains, as well as a novel price competitiveness index by Worrell, Greenidge and Lowe (2013). The results suggest that Barbados is competitive both regionally and globally, ranking ahead of its peers in key areas such as the strength of its institutions and the quality of its health care and primary and higher education. In addition, despite some declines in tourism post-crisis, the island has maintained market share in most of its key foreign exchange earning sectors, while seeing improved price competitiveness of its internationally traded goods and services over the past decade.