http://worldcat.org/entity/work/id/908202800

Barbados 2010 Article IV consultation : selected issues

1. Lack of information about Barbados' growth potential and its determinants has hampered the analysis of inflationary pressures and debt dynamics in the country. Accelerating inflation before the current recession broke out suggests that aggregate demand was running ahead of supply. However, sticky inflation figures so far in 2010 raise the issue of the relative importance of economic slack and commodity price shocks in determining the cost of living in Barbados. To shed light on the issue, measures of Barbados' potential to produce goods and services are needed, so that cyclical pressures on production resources can be separated from exogenous shocks. Moreover, the public debt as a ratio of GDP has experienced a marked spike in the past five years. Looking ahead, sustainable debt accumulation will depend on trend growth rates in the country, which creates an urgent need for forward-looking estimates of Barbados' growth potential. This note attempts to close this information gap by using a growth accounting exercise to estimate potential growth and its main drivers.

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