To do so, they must build up their capacities for accurate analysis and forecasting of changes in international financial market conditions and of the effects on their domestic economies. Central banks in every country should also endeavor to enhance the credibility of their monetary policies.
The answer: by containing aggregate demand, and thereby limiting the demand for imports, to fall within the supply of foreign exchange. The tools for aggregate demand management are government revenue, expenditure and the strategy for financing government’s deficit. These are the principles underlying the Barbados economic strategy. The global recession has been a challenge for Barbados.