incorporate into practical guidance for policy. our academic research needs to be in depth and grounded in caribbean realities. that requires deep understanding of the theory, careful observation of caribbean experience and economic behaviour, and painstaking analysis of the data. you also need to read widely on the topic, and set aside time for thoughtful reflection, as you proceed with the research. the reward will be genuine insight and useful contributions to our understanding of how our economies work. if i have a criticism of much of economic research in the caribbean nowadays, it is that it is too derivative, an unthinking application of imported theories and methodologies to caribbean data, often accompanied by econometric pyrotechnics which anyone with mathematical training can very easily see through. at the end of the day this kind of research leaves the policy maker with little guidance, and the general public puzzled and apprehensive. there is a need, in barbados, in the caribbean, and indeed in the wider world, for economics that people can understand. the economy is no more than a convenient way of thinking about all the commercial transactions that take place in the national space in the course of a day or a month or a year. the varying nature of these transactions, and the relationship between them, are mind - bendingly complex, and the economic theories we offer in explanation are pitifully oversimplistic by comparison. good economics consists of essaying a theory that seems to fit the circumstance under investigation, observing the outcome, making adjustments, and repeating. it is a process that of necessity involves the people who are doing the transactions that produce the observed result. if they are mystified about what you ’ re doing and why, chances are you will not get the expected result. that is why it is always most effective to end with economics that people can understand, whatever your theoretical starting point. here at central bank we do academic research to deepen our understanding of economic processes, but it is always with a view to coming up with better policies and prescriptions, whether it is with respect to taxation, fiscal policy, tourism development strategy, import substitution or the many other burning issues that we must address from time to time. bis central bankers ’ speeches

up - to - date, many caribbean territories have recognised that their legal and tax systems require improvement if they are to be able to facilitate the rapid changes taking place in commercial transactions. if tax and accounting treatments are not clear, the evaluation of risks of individual products becomes difficult and if such treatment is vague, one cannot as effectively and with certainty use technologies to meet market demands. institutional development must therefore be appropriate to objectives of having a modern capital market system and must be clear in its framework. credit ratings are increasingly important. however, though they have the advantage of protecting the investor, it is important that the investor who is willing to accept higher risks for higher returns, not be discouraged by the system as this could have the result of suppressing the most important function of capital markets, which is to attract investors with different risk appetites. protection without overprotection is what is desirable. this caveat also applies to securities commissions. investors look to securities commissions to safeguard markets through establishing minimum standards of capitalisation, registration of securities and market participants, timely and material disclosure, and effective enforcement. however, commissions have to strike the middle ground of being strong managers without being overly intrusive. in many emerging markets also the timely disclosure of material information is often inadequate. adequate financial disclosure is crucial for investors to make informed investment decisions - and though we have had few issues of improprieties as has occurred in other developed country markets, the caribbean still needs to work on this aspect of its information sharing. utilization of evolving innovation in information technology another necessary condition for capital market development in the region is the aggressive incorporation of innovative techniques offered by advances in information technology. perhaps in no other activity, with the possible exception of information technology itself, is the pace of innovation as great, or the cost of failure to utilize the technology as high as in capital markets. one can miss major opportunities if the technology is not able to identify them quickly. access to software to calculate default probabilities and various risks, which are critical when dealing with financial products, can now be completed almost instantaneously with the appropriate technology. in addition, due to the progress in telecommunications, including the internet, massive data collection has become far easier than in the past, so that investors - say in hong kong - can spot opportunities as they arise, and can access information on the barbados market and vice versa. we therefore have to cease thinking of our markets as isolated. they are not. investors are better positioned than ever before