A study of post-2008 growth in Caribbean small island states

Abstract

This dissertation analyses the pattern of economic growth following the 2008 crisis in nine Caribbean small island states, focusing on their recovery from the initial economic shock. This analysis is first performed through the use of charts and graphs plotting each nation’s gross domestic product per capita, before then indulging in detailed fixed effects panel data analysis. This panel data analysis uses four key growth variables, namely lagged gross domestic product per capita, lagged natural disaster damage, trade openness and public debt in order to determine causal relationships with annual changes in gross domestic product.

After analysis was undertaken, results showed that contrary to a priori expectations, it was the smaller states that coped best with the task of recovering from the crisis, whilst the larger and more economically diversified states failed to perform adequately. Surprisingly, trade openness was found to adversely affect economic growth efforts.

The findings relating to trade openness shed light on the issue as to whether or not trade openness is desirable. On the one hand such openness stimulates countries to pursue competitiveness and benefit from comparative advantage, but at the same time, such openness render countries highly exposed to external shocks.