and corporates have been issuing fixed income securities in the trinidad and tobago capital market. as of now, no attempt has been made to incorporate these transactions in one integrated regional platform. i have gone through this analysis to suggest that while there has been progress over the past few years, the creation of an integrated regional capital market is still some way off. i also agree with several commentators who take the view that an integrated regional capital market, along with considerable strengthening of several regional institutions, are necessary elements for deeper monetary cooperation. prospects and i will now make some brief comments on the prospects for monetary union. let me first recall what i am sure you all know that two of the main characteristics of a monetary union are a common currency and a regional central bank that implements a common monetary policy for all the participating members. with the loss of monetary autonomy that is implied, adjustment to exogenous shocks, when they are needed, must come from fiscal policy and from factor mobility, mainly labour and capital. because of differing factor endowments and because benefits from integration do not accrue evenly across the union, monetary unions normally include mechanisms to compensate economies that are disadvantaged. the current discussions about a monetary union for the caribbean invariably run on two main tracks. the first is the debate about whether there is enough complementarity in the production structures so as not to make a common monetary policy unmanageable. the second is about the degree of convergence that currently exists among the regional economies, which is seen as a measure of the region ’ s readiness for monetary union. the first issue - about the complementarity of production structures - is conceptually an important one, in that it has implications for the effectiveness of a common monetary policy. specifically, if the members of the union are affected differently by the same exogenous event, serious policy challenges could arise. for example, if an increase in oil prices led to a pronounced slowdown in the industrialized economies, this could have serious implications for those countries in the region that depend heavily on tourism. to maintain employment in these economies, the appropriate response may be some monetary expansion or even a depreciation of the exchange rate. for an oil - producer in the region, let ’ s for the sake of argument, call it trinidad and tobago, the increase in oil prices may indeed lead to the overheating of the economy, requiring a contractionary monetary stance. such a situation creates a major challenge for the regional central bank which must devise a

for regulatory arbitrage in the system. fortunately, an effective but still largely informal system of information exchange between regulators has served to contain the potential damage. it is gratifying indeed that we can have the amount of regulatory cooperation that currently exists, even in the absence of appropriate region - wide legislation. capital market integration has been much less than that achieved in the banking system. specifically, there has been limited integration of bond and equity markets in the region. and this is a critical challenge since, potentially, capital markets can provide the long - term risk financing that are needed for the development of the regional productive structure. so far, integration of the three major regional stock markets - jamaica, barbados and trinidad and tobago - has been limited to the cross - listing of twelve securities. while the process of cross - listing facilitates better pricing, it is no replacement for an integrated regional exchange. a truly regional stock exchange is a harmonized system whereby all member states are linked electronically for the conduct of trading in equities, with no controls on cross - border capital flows and easy access to information. a fully integrated regional exchange would allow firms to have a wider market for raising needed capital at competitive rates, thus allowing the productive sectors to become more competitive both regionally and internationally. for a truly effective regional stock exchange, several preconditions that do not now exist must be met. these include : • harmonized audit and accounting standards that simplify the interpretation and comparability of companies ’ information ; • harmonized securities legislation, including the establishment of a regional oversight body with powers to impose penalties ; • an incentive framework that promotes the listing of new productive enterprises while encouraging existing listings to seek equity capital for expansion ; • the ability of regional investors to access on a timely basis, cross - border information relating to securities and other pertinent information to help in making sound investment decisions ; and • an efficient and cost - effective clearing and settlement system. admittedly, some of these preconditions are currently receiving the attention of the authorities. alongside the stock market, a regional bond market is an important part of an effective integrated capital market. private bond issuance is a good potential source of long - term financing for business activity while a regional market for government bonds could be an important avenue for financing public sector infrastructural projects. the oecs has been developing a sub - regional market for government bonds based on a modern technology platform. at the same time, regional governments