Designing Financial Systems for Competitive Island Economies: Developing the Case for the Caribbean

It is common knowledge among economic policy makers and academics that small island economies are particularly vulnerable to external economic events outside of their control. These “shocks” have never been as deep in modern economic history as the current global recession, the depth of its impact is made all the more profound because of the extent to which the mantra of globalization has been absorbed into the cultural fabric of the economic and fiscal policies of small island states. The impact on the financial system and financial intermediaries within small island states is as yet uneven with some anecdotal reports, yet lacking substantial empirical evidence and theoretical conceptualization. Based on a review of literature and previous studies, this paper presents a doctoral study in progress on the design and development of resilient and robust financial systems for competitive island economies in the Caribbean. This research (in-progress) paper discusses the vulnerabilities and capabilities of island economies in an increasingly volatile economy, and provides a preliminary review of the current state of affairs in the Caribbean. The paper concludes with several initial findings and outlines directions for further research and development. Designing Financial Systems for Competitive Island Economies