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This article builds on the work of Greenidge, employing structural time series model (STSM) to explain and forecast quarterly tourist flows from Barbados' primary source markets — the USA, the United Kingdom, Canada and CARICOM — for the period 1966:1-2007:4. Results show that the structure and nature of the individual time series components have evolved significantly since the work of Greenidge. Of particular interest, arrivals from the main source markets appear to be less income sensitive. The study also investigates the predictive power of STSM. A seasonal naive model is used for benchmark comparison purposes. We find that STSM outperforms the seasonal naive model in its both multivariate and univariate form.

This article investigates the sustainability of the current account deficit in Barbados over the period 1960 to 2006. Various unit root and cointegration techniques are employed to determine whether the country is satisfying its Intertemporal Budget Constraint (IBC). The cointegration regressions suggest that the current account of Barbados is sustainable and that deviations from long-run equilibrium between real exports and imports are corrected in the short-run with imports making the adjustment.

This paper addresses the issue of threshold effects between public debt and economic growth in the Caribbean. The main finding is that there exists a threshold debt to gross domestic product (GDP) ratio of 55-56 percent. Moreover, the debt dynamics begin changing well before this threshold is reached. Specifically, at debt levels lower than 30 percent of GDP, increases in the debt-to-GDP ratio are associated with faster economic growth. However, as debt rises beyond 30 percent, the effects on economic growth diminishes rapidly and at debt levels reaching 55-56 percent of GDP, the growth impacts switch from positive to negative. Thus, beyond this threshold, debt becomes a drag on growth. JEL Classification Numbers:F34, C23, C24