Stabilisation Policy with a Fixed but Market-determined Exchange Rate

Dr. DeLisle Worrell, Governor of the Central Bank

The following paper by Dr. DeLisle Worrell, Governor of the Central can be found on the Central Bank’s website in its Economic Review for August 2012. In light of the heavy criticism levelled at the Governor by many of his critics – who have NOT taken the time to publish – BU links to the paper to provide fodder for debate on economic matters.The reality is not many Economists are as qualified as the Governor to speak about small island economies.

Abstract
This paper describes how fiscal policy is used in Barbados to manage the demand for foreign exchange and ensure that the Central Bank is always stocked with adequate foreign exchange reserves to supply the needs of the interbank market. This enables the Central Bank to maintain an unchanged exchange rate through intervention on the interbank market. Sustaining the peg in this way lends credibility to Government economic policy and provides strong incentives to save and invest in the local economy.

Read full paper, page 57

Notes From a Native Son – How the Eurozone Crisis Threatens Barbados

Hal Austin

Introduction:
Europe is in serious crisis. Greece, a culture that has abandoned hard work and resents paying taxes, goes to the polls in the middle of next month to vote for its economic future. The decision voters in that southern European nation – the home of democracy – have to decide is if they remain in the 17-member Eurozone, or get out. Damned they do, damned if they don’t. The truth is that an economy which makes up only two per cent of the Eurozone could not, in normal times, be such a destructive threat to the single currency area, farless the global economy, but these are not normal times. Remember how a single wholesale bank, Lehman Brothers, disrupted the system? Banks in the other southern European economies – Italy, Spain, Portugal – and Ireland are also under enormous pressure, and the massive exposure of French and UK banks to the area also make them vulnerable.

But it is the German hugely successful economy that is in real danger, since, like the history of capitalism, German prosperity is build on exports – mainly to southern Europe. While this drama is being played out in Brussels and Frankfurt, most Barbadians would rightly ask what has all this to do with them. Well, the answer is far more than at first meets the eye. First, while global leaders, from China to the US, hold their breath, it should be remembered that the Greek tentacles stretch throughout Europe and across the Atlantic to the US, through the hidden workings of the global banking system. Also, unlike 2007/8, when China rescued the world, the world’s second strongest economy is also itself in trouble.

More important, Britain, our main tourism market, although it is outside the Eurozone, the 17-member economic union is its main trading bloc, with massive banking exposure to the markets. Already there is enormous capital flight from Athens, first corporates and the wealthy moved lots of cash out of the jurisdiction, corporates to bank elsewhere and rich individuals to buy property in Britain and other ‘safe’ havens.

Filtering Truth From Fact About The Performance Of The Barbados Economy

Governor of the Central Bank Dr. Delisle Worrell

The International Monetary Fund (IMF) recently released a statement on the Barbados economy which has caused some Barbadians to sigh with relief. Central Bank Governor Delisle Worrell was also also full of glad tiding in April when he forecast the economy to grow 2% during his Review of Barbados’ Economy for the First Three Months of 2011. Why is BU not as optimistic?

Is it not ironic suggesting growth for an economy which relies heavily on that of the United States? The US legislature is currently debating whether to raise its debt ceiling to 16 trillion dollars!   Following close behind the US is the UK government  who has committed to cut 600,000 government workers over a three year period. How can we be so confident about growth when the two main markets we rely on for inflows of tourist, foreign direct investment and remittances continue to struggle? What growth the US has managed to achieve in the last year is what the economists refer to as jobless growth.

Given the prevailing economic uncertainty one might have reasonably expected our intellectual cadre of professors at Cave Hill,  to have come to the assistance of ordinary Barbadians, and provide an unbiased and reasoned interventions to demystify the economic gobbledygook we are being fed. No such luck. Instead what we have had to ‘processed’ is an attack on the credibility of the information presented by the Central Bank of Barbados in its periodic updates  to the nation. The Central Bank of Barbados has always held the respect of both sides of the political spectrum in Barbados. This is our first recollection of any Governor of the Central Bank attracting the kind of attack delivered with the fierceness as we are witnessing from former Prime Minister and Leader of the Opposition Owen Arthur and former Central Banker, economist and Arthur’ s right hand man Clyde Mascoll. They have both vehemently dismissed the view posited by Governor Worrell that the economy has grown.