Barbados: Sectoral Balance Sheet Mismatches and Macroeconomic Vulnerabilities

29 Pages Posted: 2 Feb 2012

Date Written: January 2012

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.

Keywords: Barbados: Sectoral Balance Sheet Mismatches And Macroeconomic Vulnerabilities, Budget Deficits, Capital Inflows, Corporate Sector, Economic Growth, External Sector, Financial Sector, Tourism

JEL Classification: F30, F34, H63

Suggested Citation

Yartey, Charles Amo, Barbados: Sectoral Balance Sheet Mismatches and Macroeconomic Vulnerabilities (January 2012). IMF Working Paper No. NO.12/31, Available at SSRN: https://ssrn.com/abstract=1997744

Charles Amo Yartey (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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