##stodians they choose. barbadian investors holding direct deposits with commercial banks in the us can take comfort from the fact that the federal reserve bank appears to be taking a protective stance and is unlikely to allow any large us commercial bank to fail. certainly, the decision of morgan stanley and goldman sachs to convert their status to that of a commercial bank ( from that of investment bank ) suggests that this is the market sentiment. there is much discussion about the moral hazard effect of such support as it reduces the incentive to increase the level of care required of these institutions. in the us system, ordinary depositors are assured us $ 100, 000 in federal deposit insurance per depositor per bank. in barbados, deposit insurance is also in place up to an amount of bds $ 25, 000 per depositor per bank. this was put in place in 2007. it applies to part iii companies, as well ( that is, merchant banks, trust and finance companies ). in the meanwhile, the business of local financial institutions with their overseas correspondent banks continues. such overseas correspondent banks are assured of liquidity support from the federal reserve bank in the us. the central bank of barbados also provides liquidity support to domestic banks but there is no reason to expect that this will be called upon as our banks ( except for possible losses in value on their us dollar securities ) have not been directly impacted by the developments in the us market. it is expected that investors may turn to safe havens. barbados is generally viewed as a well regulated domicile. over the longer term and into 2009, given the size of the bailout by the us government, we can expect larger us fiscal deficits, possibly a further depreciation in the us dollar and a likelihood of a longer us recession than was anticipated. the likelihood of a global slowdown also becomes greater. the international credit markets are likely to be hesitant to lend for a while until markets settle. however, given the healthy level of barbados ’ foreign exchange reserves, this is unlikely to be significant for barbados at the level of official borrowing at this time, but foreign investors into barbados who were depending on borrowing on the international markets may be put on pause. the one positive outcome of all this is that if there is a global slowdown as expected, and therefore lower demand for oil, oil prices should contract.

delisle worrell : the search for practical economics remarks by dr delisle worrell, governor of the central bank of barbados, at the international monetary fund – central bank of barbados – university of the west indies ( imf - cbb - uwi ) conference, bridgetown, 27 january 2011. * * * i begin this morning with a quote from eric d. beinhocker of the mckinsey global institute, london, from his 2007 book the origin of wealth : “ as i write this, the field of economics is going through its most profound change in over a hundred years. i believe that this change represents a major shift in the intellectual currents of the world that will have substantial effects on our lives and the lives of generations to come. … just as biology became a true science in the twentieth century, so too will economics come into its own as a science in the twenty first century ”. 1 i am not as confident as is beinhocker that change has begun to take root ; i scan working papers from all the leading economic research institutes and university departments daily, and they are all comfortably situated in a conventional idiom of economic analysis. however, i do share his conviction that a change that goes to the foundations of our discipline appears to be needed, if economists are to have useful advice for policy makers about improving the performance of modern economies. the longer i stay in this business, the more i am disappointed by the disconnect between what economic analysis would seem to suggest, and what is practical and makes sense. 2 clearly a conference such as the one we begin today cannot address the fundamentals of our discipline, but i believe it offers an opportunity which should not be missed, to explore needed changes in our approach to economic analysis. no doubt the revolution in economic thinking will come upon us, when and from what quarter we cannot tell ; but in the meanwhile there is much that we can do, as economists, to improve our practices, approaches and techniques, so that we are able to offer usable advice on economic policy. i offer an illustration in this short address, of what might be called “ practical economics ”, meaning analysis that enlightens the decisions policy makers have to make. let me begin with an example of conventional monetary policy analysis and advice in caribbean. conventional economics, reflected for example in the imf occasional paper “ monetary policy implementation at different stages of market development ”, 3 recommends that monetary policy is the tool that should be used