Opening Remarks
In response to the global economic crisis, policy prescriptions
were wide and varied across the globe, from the Keynesian
to the Classicalists schools of thought. Naturally, each
country experienced different macroeconomic results and
some nations were able to withdraw from the recession
earlier than others were. The question therefore remains –
which school of economics is more appropriate and relevant
in each of the unique and diverse circumstances that exist.
Over the past few years, there has been an explosion in
government intervention in economies across the world,
as expansionary fiscal policy superseded unresponsive and unprecedented easing of monetary
policy. So far, it seems as though the Keynesian school of economic thought is promising to be
more successful, in that while there is a role for the private sector, government intervention is
necessary to stabilize the business cycle and spur economic growth.
In the Caribbean region, the role and significance of government intervention is even more acute
especially in the current context of rising indebtedness in the region. In this issue of Caribbean
Investment iQ, we examine this issue closer through the lens of the Caribbean perspective and
present the views of various experts, both from an academic and market standpoint.
Striking the Balance:
As always, Happy Reading!
The Optimal Level
of Government Intervention
The Honorable Christopher Peter Sinckler, M.P.
Minister of Finance and Economic Affairs
Barbados
Yours Sincerely,
Jason Julien
General Manager
What’s Inside
Financial Highlights
• he global economy was highly reactive to the developments in
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the US, particularly the partial shutdown of the government.
A temporary solution was finally arrived at on 17 October with
the new bill allowing the US federal government to continue
meeting its obligations until 15 January 2014, while extending the
debt limit to February 2014. This is likely to create some further
volatility in early 2014.
• s has been the trend, the economic performance of the
A
emerging markets has outpaced that of the developed markets.
However, this performance is continuing to slow primarily as a
result of weaker commodity and raw material demand from the
developed economies. Growth in 2013 is forecasted at 4.5% for
the emerging markets.
• ncreased speculation of tapering of QE by the US Federal Reserve
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resulted in some weakness of the US dollar during the period,
but the greenback has been supported by stronger economic
fundamentals. Commodities have performed poorly in 2013, and
despite some signs of a recovery, there is not much evidence that
the asset class will have a sustained recovery in the near future.
• conomic growth in the Caribbean region remains subdued
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largely as a result of slower tourism-related inflows as well as a
decline in construction activity. The region also continues to
grapple with excessively high and onerous debt levels, which in
some countries have become unsustainable.
Special Feature: Striking the Balance: The Optimal Level of
Government Intervention
• r. Marlene Attzs, Deputy Dean (Distance and Outreach), Faculty
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of Social Science and Lecturer at the University of the West Indies
presents the historical perspective on government intervention in
the Caribbean reg