Central Bank of Barbados Governor calls for relevant research on Caribbean economies

The Central Bank of Barbados

CANA is reporting that the Governor of the Central Bank of Barbados (CBB), Cleviston Haynes, says there’s a need to conduct relevant and timely research that includes economic ideas and models that capture the essence of Caribbean economies.

Haynes said the research must include small size, high import propensity and a binding foreign exchange constraint among other issues.

“More importantly, we must market our research through discussion forums such as these, on social media platforms, and on websites or in the traditional and non-traditional media so that our publics understand our work, and any ensuing policy initiatives.

“The research shows that an informed and educated public helps with the successful execution and transmission of the national economic strategies,’ Haynes told the CBB sponsored 39th Annual Review Seminar held under the theme “Critical Minds for Critical Times: Economic Research as a Building Block for Transformative Growth in the Caribbean”.

He told the delegates that the theme challenges each of them “to critically think about the type of research we undertake and how the resultant findings contribute to national economic policy initiatives designed to drive transformative economic growth.

“We must, therefore, conduct relevant and timely research that includes economic ideas and models that capture the essence of Caribbean economies,” he said, noting also there was a need to adequately understand transformative growth and what role can economic research play in fostering such growth. “Transformational growth is a long-run phenomenon, which involves at its core the structural transformation of the economy, the basic premise being the repositioning and reallocation of economic activity across the broad sectors of the domestic economy.

“For the majority of Caribbean countries, these sectors are services, primarily tourism and financial services, and to a lesser extent manufacturing, mining and agriculture. In the case of Barbados, the government has articulated a national digitisation strategy to transform the economy. The aim is to build a new economy that is knowledge-intensive, technologically driven, and that promotes innovation, creativity and inclusiveness,” the CBB governor said.

He said technological advancements were fuelling the pace of digitisation of the global economy, which represents the greatest potential to drive transformational growth through changes in the economic structure of production.

Haynes said that the CBB recognises that changes in technology are transforming the way financial institutions are interacting with their customers.

“In particular, the impact of technological advancements on financial regulation and supervision should be an area of research focus, as central banks must adapt to these changes and engage with key stakeholders to ensure the appropriate safeguards are in place to manage the inevitable risks that the new developments present.

“We must also conduct more micro-based studies to develop a deeper understanding of the behaviours our societies. The initiative to reduce the use of cash is a prime example of how such research can help us better understand the payments landscape in our economies.”

Haynes told delegates that the goal of structural transformation and ultimately the realisation of transformative growth must be inclusive, noting that this means that everyone benefits from or shares in the income and wealth generation when the economy expands.

“From an economic perspective, research on the strategies that increase total factor productivity, competitiveness and economic diversification within and across economic sectors are essential,” he said, adding that “our research must examine how we can reduce the unsustainable use of natural resources to ensure that natural disasters and climate change do not put the prospects for transformational growth at risk”.

Delegates will discuss a wide range of topics including the launch of the 2019 Financial Stability Report and a Barbados Economics Society discussion forum on the effectiveness of the BERT programme.

CBB Director of Research and Economic Analysis, Anton Belgrave, said the Mia Mottley administration’s domestic debt restructuring did not trigger economic destabilization but it did weaken the country’s financial stability, among other “wide-ranging” effects.

Belgrave made reference to an overall decline in the value of assets of financial institutions in 2018 as a result of the debt restructuring.

“We did find that our financial stability has been weakened by the loss of profitability stemming from the restructuring.

“One of the over-arching themes of the document is the impact of the domestic debt restructuring on our financial system and it will hopefully be a once in a lifetime event, but as you can see… it had wide-ranging repercussions and yet the financial system still remained stable.”

Belgrave said that the impact the restructuring had on the financial system was “mainly driven by accounting valuation issues, because the newer bonds had a longer maturity and lower coupons – the net present value of the bonds, in an accounting sense, was lower than what they replaced”.