Working Paper Series: Special Edition of 2016 to 2018 Interns

Results obtained from the empirical model indicate that there is a unidirectional long-run relationship running from the focused variables and the control variables to economic growth. They converged at a rate of 6.0 per cent (trade openness ) and 5.6 per cent (tourist arrivals) annually. There is both a short and long run causal relationship running from FDI to economic growth as expected. On the other hand, trade openness has no short-run relationship with economic growth while tourism arrivals was found to have a short-run relationship with economic growth. The study encountered a number of problems that would have affected the full potential of this study. Persistent data challenges in the ECCU did not allow for a longer time series that would have been able to capture this situation over the years. In addition, the study would have fallen short of comparable periods to determine if the value of the cointegrating relation was dynamic over the years. In light of the use of a new metric it would have been beneficial to compare one of the agriculture based economies versus a tourism based economy. Another limitation was that impulse response function (IFS) analysis failed to make its way into the study; this was due to time constraints. Given the limitations above, there are ways to advance future research. For instance, the low convergence rate may be a result of the absorption capacity of the ECCU territories. Thus investigating the territory’s capacity to benefit from economic openness may be worthwhile. 7.0 Recommendations The findings show that there is a low convergence rate implying economic openness has contributed little to economic growth in the six independent ECCU countries. It further suggests that continued efforts are needed to diversify the economic activities of these economies. The study also shows that there is a detachment between the economies and this has resulted in economic loss due to leakages in the system. Lastly, in alignment with the a priori, tourism arrivals was found to have a more causal impact than trade openness , thus it may be prudent to push strategies in the area of tourism activities. Based on these findings, a number of recommendations are put for consideration by the member Governments of the ECCU. • Member governments should continue their efforts to making their economies more robust by identifying other leading and potential sectors to push economic performance.

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