Working Paper Series: Special Edition of 2016 to 2018 Interns

countries see David (2007). Moreover, the metric depends on a fusion of non-policy and policy dimensions. Non-policy aspects include resource endowment, country size, and taste while policy aspects are concerned with trade restrictions (trade laws). Therefore, a country may have a high trade ratio based on its non-policy construct rather than the policies implemented by the country, Lloyd and Maclaren (2002). In the stylized facts section, the data show that on an ECCU level the tourism sector has surpassed the agriculture sector since 1987 and shows that the latter is on a downward trend since then. Further, comparing two decades (1990-1999 and 2000-2009), shows that the tourism sector contributes more to the region’s GDP in both decades compared to the contribution from the agriculture sector. Moreover, four of the six independent ECCU territories show that tourism is the main export, see Table 5 in appendix. 27 On a per country assessment, the Dominican agricultural sector contributes more to GDP than does tourism but in St Vincent and the Grenadines, the agriculture sector shows decline relative to the tourism sector. In summary, tourism is an export that has been challenging traditionally traded goods. In fact worldwide and is many LDC’s, tourism exports are the main integrating link into global markets. Moreover, unlike the traditional metric’s failure to decipher between policy and non-policy measure, the proxy used captures the deliberate policy efforts of ECCU member governments to increase tourism exports. Secondly, data reveal that tourism activity has outweighed and contributed more to the region’s GDP versus the agriculture sector under the study period. Upon these points, it may be more adequate to use tourism arrivals to capture openness in the ECCU.

4.2 Empirical methodology Panel Unit Root test

The test for unit root is done analyzing if the series reverts to its mean (stationary) or if the series contain either a deterministic or stochastic trend (non-stationary) Mamingi (2005). In fact, estimating a non-stationary series would result in spurious regression, upon which accurate interpretation cannot be conducted, Maddala and Kim (1998). Moreover, this concept aids in understanding the nature of the variable and its potential impact on economic performance as it relates to structural breaks. For instance, if FDI is found to have unit root, it may suggest shocks

27 Dominica and St. Vincent and the Grenadines are the economies with agriculture as the main export.

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