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Barbados

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  • Charles Amo Yartey
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    Abstract

    This paper uses the balance sheet approach to analyze macroeconomic vulnerabilities in Barbados between 2006 and 2009. It discusses the financial position of the economy and its main sectors and the sectors'' exposure to changes in exchange rates. The main finding of the analysis is that the balance sheet of the aggregate economy has been weakened by the recent deterioration in the balance sheet of the nonfinancial public sector. Macroeconomic vulnerabilities have increased in Barbados since 2006 due to the high public debt and the deterioration in the net financial position with nonresidents. The private sector, however, maintained a healthy position and seems resilient to shocks. The paper also finds the balance sheet of the nonfinancial public sector has deteriorated significantly reflecting weak fiscal performance. While the central government is highly vulnerable to exchange rate shock, debt rollover risks are likely to be limited since most of external liabilities are long term and most domestic liabilities are held by the National Insurance System.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/31.

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    Length: 29
    Date of creation: 01 Jan 2012
    Date of revision:
    Handle: RePEc:imf:imfwpa:12/31

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    Keywords: Budget deficits; Capital inflows; Corporate sector; Economic growth; External sector; Financial sector; Tourism; domestic currency; central bank; financial assets; financial system; external debt; financial corporations; public debt; current account; external debt statistics; currency crises; debt statistics; portfolio investment; current account deficit; financial balance sheet; exchange rate devaluation; currency crisis; external liabilities; international reserves; currency mismatches; financial institutions; balance of payments; financial services; currency debt; domestic financial system; currency mismatch; currency risk; foreign currency debt; sovereign debt; debt sustainability analysis; interest rate risk; international financial markets; public finances; domestic foreign currency; foreign debt; debt restructuring; debt ratios; debt crisis; external debts; capital account liberalization; debt sustainability; domestic financial institutions; international finance; financial structure; debt management; national debt; domestic creditors; stock market; hedging; financial markets; nominal devaluation; public sector debt; sovereign debt crisis; international lending; debt problems; public sector indebtedness; balance sheet effects;

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    1. Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc.
    2. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    3. Guillermo Calvo & Alejandro Izquierdo & Luis-Fernando Mejía, 2004. "On the empirics of Sudden Stops: the relevance of balance-sheet effects," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
    4. Christopher M Meissner & Michael D Bordo, 2006. "The Role of Foreign Currency Debt in Financial Crises: 1880-1913 vs. 1972-1997," WEF Working Papers 0001, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
    5. Janine Aron & John Muellbauer, 2006. "Housing Wealth, Credit Conditions and Consumption," Economics Series Working Papers WPS/2006-08, University of Oxford, Department of Economics.
    6. Andreas Billmeier & Johan Mathisen, 2006. "Analyzing Balance Sheet Vulnerabilities in a Dollarized Economy," IMF Working Papers 06/173, International Monetary Fund.
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