Thursday, 25 March 2010: 15:10
The paper seeks to determine to what extent the progressive deterioration in the external current accounts in Barbados especially over the ten-year period of 2008 may be considered a monetary phenomenon, as argued by the advocates of the monetary approach to the balance of payments. A simple model that links the external current account to domestic credit, along with some standard control variables is postulated and estimated, using the auto regressive distributed lag (ARDL) bounds testing approach to cointegration, developed by Peseran et al (2001). The data for the analysis spans the period 1970 to 2008.
The paper finds evidence that domestic credit creation plays an important role in the determination of the external current account in Barbados. This lends credence to the view that balance of payments issues do indeed reflect monetary developments in the country.
The paper finds evidence that domestic credit creation plays an important role in the determination of the external current account in Barbados. This lends credence to the view that balance of payments issues do indeed reflect monetary developments in the country.