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Please use this identifier to cite or link to this item: http://hdl.handle.net/10202/129

Title: Promoting investment in small Caribbean states
Authors: Kolstad, Ivar
Villanger, Espen
Keywords: FDI (Foreign Direct Investment)
Domestic investment
Small states
Issue Date: 2004
Publisher: Chr. Michelsen Institute
Series/Report no.: CMI Working paper
WP 2004: 9
Abstract: This study performs an econometric analysis to determine the main policy levers for investment promotion in the Caribbean. The results provide the following policy advice to Caribbean policy makers seeking to increase investment in, and hence the growth prospectives of, their countries. 1. Investment, both foreign and domestic, is higher in countries that are open to international trade. Our results also suggest that Caribbean countries might see a greater effect of trade integration than other countries. Caribbean governments should therefore pursue regional trade arrangements, and actively support the WTO process of global trade liberalization. 2. Investment, both foreign and domestic, is higher in countries whose domestic markets are larger and more advanced. Regional integration to expand what is considered the domestic market, is thus beneficial. 3. Investment, both foreign and domestic, is higher in countries with greater political stability. To inspire confidence among investors, Caribbean countries should avoid major political disruptions, by pursuing inclusive and participatory policies. Our results suggest that investment is particularly responsive to stability issues in countries like Haiti, Guyana, Dominica, and Grenada. 4. Foreign investors are discouraged by bad macroeconomic policies, poor infrastructure, and excessive regulation. Caribbean countries should avoid periods of high inflation and large debt burdens, and develop functional infrastructure and regulatory frameworks.
URI: http://hdl.handle.net/10202/129
ISBN: 82-8062-089-3
ISSN: 0804-3639
Appears in Collections:CMI Collection (Reports, Working Papers, Articles etc.)

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