In this chapter, the economic performance of Guadeloupe and Martinique is compared with their Caribbean neighbours. Such a comparison makes it possible to assess the developmental policies implemented in these countries since the end of the colonial era. What factors led to relative prosperity, and which policy changes are most promising in improving economic performance? It is argued that for both the French dependent territories and the independent countries institutional reform is a necessary condition for more harmonious development. In the case of the French territories, the failure of institutions takes the form of cumbersome bureaucracies that hinder their potential. Reforms require the simplification of the governance structures and the economic regulation of markets. In the case of the independent countries, progress lies in the deepening of the integration movement. New institutions will be required to reach higher levels of technical competence and a degree of sustainable economic development than possible on an individual basis.

The Grand Anse Declaration of 1989 recognised the need for financial integration within the emerging economies that comprise the CARICOM region, as a way of furthering the wider process of economic integration and, indeed, economic development in that region. Using co-movement as a measure of financial integration, this paper investigates the co-movement in stock prices among the Barbados, the Jamaica and the Trinidad and Tobago Stock Exchanges, the three major exchanges within the CARICOM region. It also examines how integrated these exchanges are with the New York Stock Exchange. The GARCH-Copula methodology and, to a lesser extent, estimated correlation coefficients, are used to attain this objective. There appears to be co-movement in stock prices and returns within the CARICOM stock markets and significant dependence structures between the returns of the three CARICOM stock markets. However, there is considerably less evidence of integration between the CARICOM markets and the New York Stock Exchange.

Small Island Developing States (SIDS) in the Caribbean continue to experience natural disasters which result in loss of life, as well as severe financial losses and economic distress despite the sustained efforts of regional and international agencies to promote disaster risk reduction. Main productive activities, including tourism and agriculture, are usually severely affected by these events, with consequent negative effects on the host economies. The disposition of business enterprises to take natural disaster risk management action is likely to be a factor in attenuating the severity of outcomes from natural hazard events. This study examines the risk reduction and preparedness measures implemented by a sample of business entities in two Caribbean SIDS, Trinidad and Tobago and Grenada which have different natural hazard exposures and natural disaster experience. The results indicate areas of deficiency, particularly with respect to risk reduction. The findings also suggest that the responses are influenced mainly by the nature of the business and the characteristics of the organisations, rather than by natural disaster exposure and experience. Recommendations are offered for public policy initiatives that may successfully motivate the business sector to assist in reducing severe natural disaster effects from major natural hazard events in the Caribbean.

This paper examines the effect interest rates have on the formation of domestic sav ings in Trinidad & Tobago. A cointegration approach is employed using data over the period 1965-1987. This is supplemented by Granger-causal testing procedures. We con clude that interest rates do indeed have an important impact on the savings process although this is more marked in the long rather than in the short run. Other variables income and foreign savings are also found to be important determinants of domestic savings and, indeed, foreign savings seem to be the most influential explanatory variable in the short run. L'EPARGNE ET LE TAUX D'INTERET A TRINIDAD ET TOBAGO: UNE ANALYSE EMPIRIQUE RESUME Dans cet article, nous considerons I'effet qu'ont les taux d'interet sur la formation de I'epargne nationale de Trinidad et Tobago. La methode de la cointegration est utilisee et appliquee aux donnees couvrant la periode 1965 a 1987. A cette approche s'ajou tent a titre supplemental des tests de causalite de Granger. Nous en tirons la conclu sion que les taux d'interet ont effectivement un impact sur le process us d'epargne na tionale bien que cet impact soit plus significatif en longue qu 'en courte periode. D 'autres variables explicatives sont aussi importantes dans la determination de I'epargne na tionale telles le revenu national et tout particulierement I'epargne d'origine etrangere qui se revele etre la variable ayant la plus grande influence en courte periode.

Small Island Developing States (SIDS) are characterized by high levels of biodiversity that are under threat. Simultaneously, the tourism sector plays a key role in many of these economies. In this paper, the Hausman-Taylor estimator is used to investigate a tourism demand function in SIDS in which marine and terrestrial biodiversity play a key role, in addition to the traditional economic and price variables. This estimator allows for both the presence of time-invariant variables, a standard feature of environmental data, and the existence of endogenous covariates. Levels of biodiversity are found to have a significant influence on tourism in SIDS and, in particular, a test for redundant variables shows that the biodiversity variables are jointly significant. This justifies their inclusion in a tourism demand function, over and above the conventional economic factors, and points to the importance of national and international policy in protecting the biodiversity of SIDS.

The text is aimed at final-year undergraduate students or those at the graduate level doing econometrics for the first time. It is an introductory course in the theory and practice of classical and modern econometric methods. A proper study of the material will allow the reader to • Understand the scope and limitations of classical and modern econometric techniques • Read, write and properly interpret articles and reports of an applied econometric nature • Build upon the elements of econometric theory and practice introduced in the book Although some basic knowledge of matrix algebra and elementary statistical theory will be assumed, much of it is covered in the body of the text. All the main theoretical concepts are illustrated with the use of econometric software, mainly EViews.

The objective of this article is to determine whether the stock exchanges of Barbados, Jamaica, Trinidad and Tobago and the virtual Caribbean Community and Common Market (CARICOM) Regional Stock Exchange (CRSE), as well as the banking, conglomerate, financial and manufacturing sectors of these exchanges, are weak-form efficient or not. Three sets of tests are used: two parametric and one nonparametric. There are lot of similarities in the evidence provided by the two parametric approaches: a traditional Box–Jenkins-type ‘correlation’ analysis to test the random-walk hypothesis and the Lo–MacKinlay's heteroscedasticity-robust and nonrobust variance-ratio tests. However, a nonparametric variant of the Lo–MacKinlay test due to Wright, based on ranks and signs, generally provides quite different results, particularly the sign test. A recommendation is made to use Wright's tests in preference to the others when examining efficiency in the CARICOM and similar exchanges. This leads to the conclusion that all exchanges and their sectors are inefficient although the Box–Jenkins and Lo–MacKinlay parametric variance ratio tests suggest that the Barbados Stock Exchange (BSE) and some of the sectors in this and the Jamaica Stock Exchange (JSE) function efficiently.

Why are growth rates in Latin America so disappointing? This book reviews the results of an ambitious research project to determine the binding constraints to growth, that is, the barrier whose removal would yield the greatest benefit in terms of growth. Included are case studies from seven countries in the region: Argentina, Brazil, Ecuador, Guatemala, Peru, Nicaragua, Trinidad and Tobago.

1 The authors gratefully acknowledge the generous financial and other material assistance provided by the Caribbean Money Market Brokers (CMMB) of Trinidad & Tobago. respectively. The essential features of the automated platforms are critically evaluated. Then, using both parametric and non parametric approaches (the latter based on rescaled range analysis), the degree of informational efficiency before and after the automation on these two Exchanges is measured. The results are mixed but, in general, the exchanges are found to be inefficient both before and after automation although, in most cases, automation leads to improvement in efficiency.

Data from Trinidad and Tobago is used to examine the relationship between the informal sector and gender. A multinomial logit model is used to identify the socio-demographic and economic characteristics of informal sector participants, the Heckman selection model is then used to estimate wage regressions and the Oaxaca decomposition technique is used to measure wage discrimination between formal and informal sector workers and males and females in the informal sector. There is evidence that formal sector workers earn more than informal sector workers and that men tend to work for higher wages than women in the informal sector. Most of the observed difference may be attributed to wage discrimination rather than to human capital differences between males and females.

We investigate the characteristics of the owners of small businesses that participate in the informal sector of an emerging economy and their perception of the risk of detection by tax authorities while doing so. Data are gathered from a survey covering 1027 small businesses in Trinidad and Tobago. Results suggest that small business owners are motivated to participate in the informal sector when they believe that the risk of detection by the tax authorities is low and that government regulations are burdensome, but there is no evidence that the tax rate itself is an issue. Their perception of the risk of detection by the tax authority is determined largely by the time they spend and the income they earn in the formal sector.

This paper examines the validity of the Sharpe-Linter-Black Capital Asset Pricing Model (CAPM) to stocks traded on the Barbados, Jamaica and Trinidad & Tobago Stock Exchanges. Tests of the CAPM are based on portfolio betas made up of stocks emanating from all three exchanges and are carried out on the alternative m ultifactor specification proposed by Fama and French (1992), extended to include the possible pricing of idiosyncratic volatility proposed by Malkiel and Xu (1997, 2006). Tests are also carried out to account explicitly for negative excess market returns w ithin the framework proposed by Pettengill et al (1995). The results support the conclusion that betas, while useful, are not sufficient on their own to account for the variation in equity returns in the CARICOM markets.

Using the case study of Trinidad and Tobago, we investigate the socio-economic, demographic and attitudinal characteristics of households that participate in the informal sector of an emerging economy and their perception of the risk of detection by tax authorities while doing so. Data are gathered from a cross-sectional field survey covering 570 households. Results using multinomial logit and ordered probit models suggest that households are motivated to participate in the informal sector when members spend little time in formal sector activity, believe that taxes are too high and their incomes are too low, have dependents to support and believe that the resulting tax evasion will go undetected. Their perception of the risk of detection by the tax authority is determined largely by the income they earn in the formal sector and the extent of government bureaucracy prevailing there.

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In this paper, an attempt is made to measure the hidden economy of Trinidad & Tobago over the period 1973–1999, within the Structural Cointegrating VAR (SCVAR) framework. Using a Tanzi-type currency demand approach as a starting point, a multiple equation SCVAR model is estimated that contains two long-run relationships linking the demand for currency with other variables. The model is evaluated on the basis of its persistence profiles, its impulse responses and other statistical criteria. It is solved using a Gauss–Siedel algorithm and is used to establish that the size of the hidden economy rose from a low of about 14% of measured GDP in the early 1970s to a high of 36% in 1981, and is currently about 20% of measured GDP. Hidden economic activity is also found to be highly positively correlated with activity in the regular economy.

Using the case study of Trinidad and Tobago we investigate for an emerging economy the socio- economic, demographic, and attitudinal characteristics that influence the propensity of individuals in the household sector to participate in the hidden economy and their perception of the risk of detection by tax authorities in doing so. To this end we analyze data gathered from a unique cross-sectional field survey covering 570 households. Our econometric results using multinomial logit and ordered probit models suggest that individual household members are motivated to undertake hidden economic activity because they believe taxes are too high, their incomes are too low, they have dependents to support, and they believe that the resulting tax evasion will go undetected.

The main objective of this paper is to study the structure and functioning of the bond market in the CARICOM sub region, to compare it with more developed markets, and to make policy recommendations for improving its efficiency and effectiveness. Bond indices are calculated for Barbados, Jamaica and Trinidad and Tobago using, as a basic raw material, yield curves for the three jurisdictions, which are also estimated. A composite CARICOM bond index is constructed as a weighted average of the three national indices. Rates of return and risk are derived from the bond indices and are used to evaluate the relative efficiency of the markets.

International evidence seems more and more to suggest that capital market development is correlated with, and perhaps even causes, economic growth and development. The authors of this paper investigate the feasibility of formalising derivatives trading in Trinidad and Tobago as a means of enhancing the capital markets of that country. A comprehensive review of existing literature is used to gather background information about derivatives trading in emerging economies, and in-depth interviews with representatives of the local commercial banks to determine the nature and extent of current derivatives trading in Trinidad & Tobago. Recommendations are made as to how the derivatives market could be widened and deepened in