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Abdullah Al-Hassan, Mary E. Burfisher, Mr. Julian T Chow, Ding Ding, Fabio Di Vittorio, Dmitriy Kovtun, Arnold McIntyre, Ms. Inci Ötker, Marika Santoro, Lulu Shui, and Karim Youssef
Deeper economic integration within the Caribbean has been a regional policy priority since the establishment of the Caribbean Community (CARICOM) and the decision to create the Caribbean Single Market and Economy (CSME). Implementation of integration initiatives has, however, been slow, despite the stated commitment of political leaders. The “implementation deficit” has led to skepticism about completing the CSME and controversy regarding its benefits. This paper analyzes how Caribbean integration has evolved, discusses the obstacles to progress, and explores the potential benefits from greater integration. It argues that further economic integration through liberalization of trade and labor mobility can generate significant macroeconomic benefits, but slow progress in completing the institutional arrangements has hindered implementation of the essential components of the CSME and progress in economic integration. Advancing institutional integration through harmonization and rationalization of key institutions and processes can reduce the fixed costs of institutions, providing the needed scale and boost to regional integration. Greater cooperation in several functional policy areas where the region is facing common challenges can also provide low-hanging fruit, creating momentum toward full integration as the Community continues to address the obstacles to full economic integration.
Abdullah Al-Hassan, Mary E. Burfisher, Mr. Julian T Chow, Ding Ding, Fabio Di Vittorio, Dmitriy Kovtun, Arnold McIntyre, Ms. Inci Ötker, Marika Santoro, Lulu Shui, and Karim Youssef

-commodity exporting CARICOM economies, while trade within each group has been no more than one percent of GDP, reflecting in part the specialization of production (or lack of diversification) and export structures, with insufficiently high variety of goods to form a basis for trade. Intra-Caribbean trade is well below that of some regional blocs, such as the EU where intraregional trade reached 13–20 percent of GDP. A large part of the CARICOM trade is with the rest of the world; the share of other CARICOM members is less than 20 percent of total trade, compared to above 50 percent

Abdullah Al-Hassan, Mary E. Burfisher, Mr. Julian T Chow, Ding Ding, Fabio Di Vittorio, Dmitriy Kovtun, Arnold McIntyre, Ms. Inci Ötker, Marika Santoro, Lulu Shui, and Karim Youssef
International Monetary Fund

, comprising of ministers responsible for legal affairs or the Attorney Generals; the Committee of Central Bank Governors , consisting of the heads of central banks or their nominees; and the Budget Committee , consisting of senior officials of the members. A Secretariat was also provided for, headed by a Secretary-General, to carry out the ordinary business of CARICOM. Caribbean Single Market and Economy (CSME) 226. In 1989, the Conference decided to integrate the CARICOM economies into a unified market with free movement of goods, services, capital and labor, and a

International Monetary Fund

the Eastern Caribbean. 5 12. In the 1989 “Grand Anse Declaration”, the Conference of Heads of Government (the highest decision-making body of CARICOM) decided to create a Caribbean Single Market and Economy (CSME) . This would integrate the CARICOM economies into a unified market with free movement of goods and services, capital and labor, and create a single economy that operates under the same coordinated and harmonized economic policies. The intention was that this would allow the region to exploit economies of scale from a large internal market and strengthen

Mr. Philippe Egoume Bossogo and Mr. Chandima Mendis
This paper analyzes trade in the Caribbean community (CARICOM) using a gravity model framework. The paper seeks to shed light on the dynamics of trade among CARICOM member countries, as well with the rest of world over 1980–99. Overall, the results show that intra-CARICOM trade has increased, suggesting that further regional integration is desirable. At the same time, CARICOM’s trade with the rest of the world has risen as well, fueled notably by the reduction of the arrangement’s common external tariff and despite the negative impact of the declining preferential access to EU markets for banana. In contrast, WTO membership does not appear to have had a positive impact on trade. Overall, it appears that trade liberalization is consistent with greater CARICOM trade integration.
Mr. Philippe Egoume Bossogo and Mr. Chandima Mendis

revitalized with the goal of establishing a CARICOM Single Market and Economy (CSME), which not only envisaged a fully functioning common market, but also coordination of macroeconomic policies and eventual monetary integration. Much remains to be done to achieve the objective of a common market. Some of the obstacles to integration have been due to the distinctive characteristics of CARICOM economies, while others have been to due to policy-induced factors. We discuss some of these features next. Small open economies —the average population for a country in the region is

Mr. Rupert D Worrell
The experiences of Caribbean Economic Community countries show that exchange rate depreciation in these countries is inflationary, and that, while changes in the relative prices of tradables may affect exports, tourism, and imports, nominal exchange rate changes have no predictable effect on those relative prices. Under these circumstances, economic literature indicates that a fixed exchange rate regime is optimal, and Caribbean countries with (quasi-) currency boards have been successful in maintaining durable exchange rate pegs. Commitment to a currency board is a potentially vital step in achieving a currency union for the Caribbean.
Mr. Rupert D Worrell

investments across Caribbean countries, in tourism, banking, insurance, and wholesale and retail services. However, in the absence of currency union, it remains small in relation to total investment in Caricom economies. B. The Role of Currency Union The cost of exchange rate uncertainty among regional currencies is a major barrier to unification of the Caricom investment market. A characteristic of Caricom currencies is that, unlike “core” currencies such as the U.S. dollar, the euro, the yen or sterling, private and public agencies in the issuing countries cannot

Ms. Jingqing Chai

system, the adjustment would have been greater if banks had been allowed to lower rates on savings deposits. Should the minimum rate requirement be removed or phased out, the cost of funds would decline when there is too much liquidity in the system, and so would the lending rates, given a fixed markup in banking lending. 1 Of the other Caribbean Community and Common Market (CARICOM) economies, only Barbados and Belize currently maintain minimum savings rate requirements. Table 6.12 . Eastern Caribbean Currency Union (ECCU): Bank Nonresident and Private