Current account deficit sustainability: the case of Barbados

This article investigates the sustainability of the current account deficit in Barbados over the period 1960 to 2006. Various unit root and cointegration techniques are employed to determine whether the country is satisfying its Intertemporal Budget Constraint (IBC). The cointegration regressions suggest that the current account of Barbados is sustainable and that deviations from long-run equilibrium between real exports and imports are corrected in the short-run with imports making the adjustment.