Research & Projects

Abstract

This paper examines the dilemma faced by low- and lower-middle-income countries in balancing debt servicing with climate stabilization investments. The need to service external debt compels governments in developing countries to engage in extractive practices to generate foreign-exchange revenue to service their high external debt, creating a trade-off with climate-stabilization investments. Utilizing a panel dataset from 47 low – and lower-middle-income countries, excluding India, that produce at least one of the three fossil fuels- oil, natural gas, or coal- from 2010 to 2021, along with three case studies from the Democratic Republic of the Congo, Cameroon, and Bangladesh, this paper found that fossil fuel-producing low- and lower-middle-income countries increase fossil fuel production to manage external debt and consequently forgo investment in climate stabilization. Additionally, increasing debt forgiveness or providing debt reduction can reduce fossil fuel production and promote renewable energy production. Therefore, to enhance investment in climate stabilization in these countries, debt forgiveness programs could serve as practical tools to increase climate stabilization efforts, address the high demand for climate investment, and decouple external debt from fossil fuel production. 

Abstract

The fiscal space crisis overlaps with the climate crisis in developing countries, complicating efforts to achieve sustainable development goals, especially in small island developing states (SIDS). This paper examines the impact of a year of extreme weather events on fiscal balance and investment in small island states. The paper utilizes a panel dataset of 26 countries across three regions (the Caribbean, the Pacific, and Atlantic, Indian Ocean, Mediterranean and South China Sea, AIMS) from 1990 to 2023. It employs a dynamic event study that accounts for heterogeneous treatment effects. The results show that extreme weather events impact the fiscal space of SIDS. In the treatment year, extreme weather events negatively impact fiscal balance and persist in post-treatment years. Net lending and borrowing exhibit similar pattern to fiscal balance, albeit with slightly greater elasticity, as indicated by the coefficients. This suggests that after an extreme weather event, governments of small island states tend to increase public borrowing to offset losses and meet budgetary needs, including the repair of damaged infrastructure, as borrowing costs rise. The revenue loss is attributable to declines in tax revenue, exports, and primary income. The results also show that weather shocks have a statistically significant negative impact on gross fixed capital formation and education spending.

Abstract

This paper draws on two sets of literature regarding the role of the central bank in pursuing price stability and inflation determinants in developing countries. Using an autoregressive distributed lag (ARDL) model with monthly data from January 1976 to December 2023, I examine the impact of climatic conditions on food inflation and overall inflation levels in Jamaica. This paper found a connection between climatic conditions and inflation levels in Jamaica, as well as food inflation. The results indicate that the adverse effects of climatic conditions on the food market severely constrain the price stability mandate of the Bank of Jamaica (BOJ). Therefore, in the BOJ's pursuit of price stability, it would benefit from adopting a proactive stance towards climate shocks by supporting the greening of the agriculture sector to build its resilience to climate shocks, which would reduce price instability, by utilizing the monetary policy tools available to prime private and public finance rather than through direct lending. This study contributes to the ongoing debate about the role of the central bank in fostering climate resilience while pursuing its objectives of price and financial stability in developing countries.

Abstract

In 2015, Exxon Mobil discovered 11 billion oil-equivalent barrels of offshore oil in the Liza project in the Stabroek block in Guyana. Production is expected to reach one million oil-equivalent barrels a day before the end of this decade. This discovery made Guyana the third-fastest oil-producing non-OPEC country, behind the United States and Brazil, and the fastest-growing economy in the world in terms of GDP growth. The Stabroek block discovery is projected to transform Guyana's economy. However, the benefits from oil production to Guyana may be overestimated, and an overly optimistic view should be avoided. This paper undertakes a political economy analysis of oil extraction in Guyana, focusing on the institutional framework governing the oil sector. The paper expands our understanding of the resource curse by shifting the focus from traditional weak institutions and internal rent-seeking politics to the contractual agreement between the government and private oil companies that governs the sector. The paper examines the management of the oil sector across the entire value chain by interrogating the legal framework and the Production Sharing Agreement between Guyana and the oil companies: Exxon Mobil, Hess, and CNOOC. The analysis is placed within the global context of the energy transition. By analyzing the interactions among the various stakeholders in the oil sector, the paper presents a comprehensive institutional analysis of oil management in Guyana, enabling us to assess whether the discovery of oil is a driver of economic development or a potential cause of a development trap. The insights from this research can inform policymaking in the oil sector and contribute to the global conversation on the energy transition in oil-rich countries.

Abstract

The University of the West Indies, established in 1948 through a regional partnership between the British government and its colonial Caribbean territories, was founded with the aim of advancing higher education and promoting regional integration. Following independence and the social upheavals of the 1950s, the university and its Economics Departments developed a critical tradition of economic thought and advocacy for regional development. Across the university's three campuses—Mona in Jamaica, St. Augustine in Trinidad and Tobago, and Cave Hill in Barbados—economics departments cultivated a heterodox approach that challenged orthodox development paradigms and provided incisive critiques of imperialism and dependency. Technical analyses of labor markets and productivity, such as those by George Cumper, were complemented by the dependency theories of Lloyd Best, Kari Polanyi Levitt, George Beckford, and Norman Girvan through the Plantation Economy School, as well as Marxist critiques advanced by Richard Bernal and Michael Witter. The university thus became a center for Caribbean economists to theorize about the region's economic challenges. These scholars systematically examined trade relations that confined the islands to primary export production, the global financial system that extracted capital from regional economies, and the influence of multinational corporations that controlled production and perpetuated laboring conditions rooted in the racial hierarchies of slavery and colonialism.

By the 1980s, this intellectual tradition had entered a period of decline. The emergence of the neoliberal consensus in the Caribbean during the 1970s and 1980s, driven by debt crises, deteriorating terms of trade, and International Monetary Fund (IMF) conditionality, led to the retreat of heterodox economic thought from the university. In its place, more orthodox approaches gained prominence, reflecting the structural constraints imposed by multinational institutions and the collapse of state-led industrial policy. This article examines the rise and decline of heterodox economics at the University of the West Indies (UWI), contending that the evolution of economic thought at the university parallels the broader political-economic transformation of the Caribbean. The intellectual project that once aimed to reshape Caribbean development through indigenous critical perspectives ultimately yielded to a reluctant acceptance of integration into the global capitalist system on terms determined externally.