This study investigates the ex-ante implications of implementing an instant payment system (IPS) in Trinidad and Tobago using a monetarist framework. The paper assumes that an IPS primarily affects the money system with the IPS application being directly linked to individuals’ banking accounts. Therefore, drawing from the quantity theory of money, a Vector Error Correction Model (VECM) is used to assess the impact of an IPS on the velocity of money, inflation expectations and the growth of broad money. The findings, using impulse response functions, reveal that implementing an IPS created sustained increases in money velocity and accelerations in broad money growth, indicating enhanced transactional efficiency. The inflation expectations response exhibits a U-shaped pattern, with initial deflationary pressures followed by eventual inflationary effects. Managing liquidity demand pressures and inflation is recommended via routine surveillance and tailoring stress testing scenarios to include an IPS environment.
Working Papers Series
As countries pursue their climate ambitions towards achieving net zero by 2050, carbon pricing has become a key element on the agenda. While this practice attaches a cost to emissions, it may lead to carbon leakage as companies shift their carbon-intensive production activities abroad to countries with less stringent climate policies than the domestic economy. One mechanism to manage differences in carbon pricing due to a lack of co-ordination and uniformity among implementing countries is the establishment of border carbon adjustments (BCAs).
In July 2024, Curaçao became an Associate Member of the Caribbean Community (CARICOM). As Curaçao deepens regional integration, opportunities for improving intra-regional trade are being explored through, for example, negotiation of a Partial Scope Trade Agreement (PSTA) with Trinidad and Tobago. This paper investigates the potential for boosting trade between Curaçao and Trinidad and Tobago through an empirical analysis of each country’s comparative advantage. Through a suite of international trade-related tools, including the Balassa Revealed Comparative Advantage, Trade Complimentary, and the Trade Competitiveness Analysis of Nations (TradeCAN) methodology, the research highlights products and sectors with the highest potential for expanding trade in goods and services.
Trinidad and Tobago ranked as the highest per capita emitter of carbon dioxide in Latin America and the Caribbean in 2023, with estimated emissions of approximately 22.8 metric tonnes of CO₂‑equivalent per person. In support of the country’s Nationally Determined Contributions (NDCs) and broader climate mitigation efforts, this paper assesses the macroeconomic and environmental implications of introducing a domestic carbon tax. Using the IMF–World Bank Carbon Policy Assessment Tool (CPAT), a set of calibrated policy scenarios are developed to evaluate how carbon pricing (combined with complementary fiscal measures) affects emissions, economic activity, and external balances.
Artificial intelligence (AI) usage has been both theorised and empirically shown to facilitate productivity gains for business and occupations. Contemporary literature offers consensus that these gains are largely concentrated among highly skilled occupations, where individuals tend to perform non-routine cognitive tasks.
Anchoring inflation expectations is a concern for many central banks around the world, especially those who have adopted inflation targeting as their monetary policy regime. Inflation expectation is the rate at which economic agents expect inflation to be in the future.
Climate-change has the potential to impact an economy’s inflation dynamics. Within the last decade, climate change impacts have had related spillovers on inflation, possibly affecting the ability of monetary policy to achieve its objectives.
The insurance industry plays a key role in mitigating the after-effects of extreme weather events. However, institutions are also uniquely exposed to these acute physical risks via higher mortality and morbidity, as well as property damage due to flooding and coastal erosion.
Driven by technological advancements, convenience, and financial inclusivity, the digital payments landscape has grown immensely. However, the rapid evolution of digital money presents significant implications for monetary policy.
