##s reaching us, at this far distance. this has whetted the appetite of many, and there is growing interest and curiosity about the possibilities for networking, exchanges, travel, culture, entertainment, sports, commerce, conferences and all the many ways our societies might interact. the barbados - china friendship association ( bcfa ) intends to provide a central node for a multifaceted network covering all areas that might be of interest to members and the general public. there is an opportunity for all those who might have an interest in the chinabarbados relationship to join the association and help us shape its agenda. the bcfa is a sponsor with the chinese embassy and the central bank of the fish and dragon festival, which we are introducing to the public today. the association will have a booth at the festival, with information on membership, the association ’ s actual and future activities, information on resources for mandarin language training, information on training and travel opportunities. if you already have an interest in interacting with china and the chinese we need to hear from you. and if you are merely curious there will be plenty to pique your interest and give ideas and inspiration for a deepening of your involvement with the bcfa and with china. we invite you to visit and like the festival ’ s facebook page entitled fish & dragon festival. we plan an exciting, entertaining and informational festival, which is sure to be enjoyed by all. and after the festival the bcfa will keep things going, with the assistance and engagement of all those who share our passion for an intensification of the china - barbados relationship. bis central bankers ’ speeches

the normal pattern seen in the years prior to 2013. barbados also has lessons to teach the world about how to grow the foreign exchangeconstrained economy. such economies depend on foreign exchange for their growth, so the growth strategy must focus on increasing the productivity of the merchandise exports and services in which the country has a demonstrated competitive advantage, enhancing the product and moving up the value chain, and investment in value added products. barbados has comparative advantages in tourism and related services, international business and financial services, and branded export products such as rum, and it has a potential comparative advantage in green energy. overall, the economy can grow only as fast as the growth of foreign exchange to finance the additional imports needed by the growing economy. a third lesson has to do with the sustainability of fiscal policy. government services do not produce any foreign exchange, and the expenditures associated with them create a demand for imports. the financing of government deficits may also add to expenditure and the demand for imports. if government ’ s expansion creates a demand for imports that is larger than the foreign currency inflows available, and that situation is allowed to persist, the fiscal stance becomes unsustainable. that is the situation the fiscal contraction of 2013 managed to avert. conversely, the fiscal stance may be sustained if it puts no pressure on the level of foreign exchange, even though fiscal adjustment may be desirable on other grounds. a fourth lesson is the limitations of monetary policy in the foreign exchange - constrained economy. in modern economies the central bank cannot actively manage financial flows across its borders, even if all flows are transacted within the formal financial sector. this is true whatever the nature of the country ’ s exchange rate arrangements, and irrespective of the rigour of stipulations and reporting requirements of the central bank. the central bank ’ s role is reduced to creating the right incentives to avoid speculative or precautionary financial outflows. the surest way to do this is to maintain a domestic interest rate policy which follows the us treasury bill rate, with allowance for a small risk premium, which will vary from country to country. all of these lessons about the management of the foreign exchange - constrained economy are drawn from economic analysis which is available through the central bank of barbados website, and in research papers i have worked on with many in the audience today. i want to suggest that this theme of the foreign exchange - constrained economy offers the central bank of barbados one way of branding our research,