The Performance of Melanesian Central Banks

Since independence, the Melanesian central banks of the Reserve Bank of Fiji, Bank of Papua New Guinea, Central Bank of Solomon Islands and Reserve Bank of Vanuatu have operated autonomously in their respective domestic economies through troublesome times. In one form or another, they have had to endure international condemnation, coups, corruption and crises. Using classic modernization theory and combination reporting analysis, this paper considers possible operational central bank efficiencies from the construction of a joint Melanesian central bank. Annual reports for the year ending 2008 from the cities of Suva, Port Moresby, Honiara and Port Vila were gathered to conduct textual analysis of the annual reporting of the Melanesian central banks, both individually and collectively through combination reporting analysis. The results of the analysis of the performance of the individual Melanesian central banks identify huge net losses resulting from speculative foreign currency trading, substantial risks from holding extensive foreign assets, and worrying governance issues through unusual dividend practices and balance sheet reserve manipulation. In light of the results, there appears a case for using combination reporting as an instrument for examining potential performance of emerging central bank problems and for considering a united Melanesian central bank to help rectify some of these problems. The implications of this study suggest that growth of linkages between Melanesian countries within the Asia Pacific region may abound through regional and economic central bank integration.