Globalization of financial markets: implications for the Caribbean

Introduction Globalization can be defined in terms of the internationalization of production [Goode, 1998, p.125], or in terms of the internationalization of markets [Lloyd, 1998, p. 163]. The former recognizes the fact that even relatively minor products are frequently found to be made with components from several countries. The latter, on the other hand, recognizes that the cross border flows of the products themselves have increased tremendously over the last two decades. This is particularly true in the case of international financial services. This report examines the globalization of financial markets and the potential consequences for selected Caribbean countries. The countries studied in this report are Barbados, Jamaica, and Trinidad and Tobago. The evolution and extent of financial globalization is examined in section 1. In section 2, a review of the macroeconomic policies of the countries in the study pertaining to trade, fiscal, monetary policy and exchange rates is presented. Further, section 3 discusses the current financial crisis and its potential for disrupting or enhancing the positioning and economic welfare of the countries. And finally, section 4 posits some recommendations, in the context of the preceding discussion, pertaining to desirable macroeconomic policy in the presence of globalized financial markets and the ongoing financial crises.