Abstract
Until recently, most of the focus of analysis of Caribbean economies has been on weak fiscal performance, high debt burdens, and the need for reforms aimed at sharpening the capacity of the region to compete in the global economy. Financial sector risks were seen as benign, with assessments pointing to generally robust indicators and adequate regulatory frameworks. This analytical framework was upturned by the failures of the Stanford Financial Group, CL Financial, and others. The size and extent of the failures raise concerns about the current models of analysis and policymaking, including the hitherto almost single-minded focus on fiscal policy at the expense of financial stability. At the same time, the episodes provide an opportunity to re-assess the policy frameworks and set out elements of a revamped approach that incorporates (i) closer linkages between fiscal policy and financial sector regulation; (ii) a re-assessment of existing approaches to financial sector supervision and the work of regulatory agencies; and (iii) greater transparency about the cost and burden-sharing of financial failures. This paper sets out some initial proposals relating to such an approach.
Published Date: November 2012
Keywords: Financial failures, Macroeconomic policy, Caribbean.
Author: Michael DaCosta, Kari Grenade, Tracy Polius
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NOV
2012