1 Realizing the Goal of Caribbean Monetary Union

The origins of a monetary union between Caribbean Community (Caricom) members date back to 1990 but today, having already missed its proposed inauguration by six years, the region still has a long way to go in realizing this goal. To put the various convergence criteria in perspective, this paper discusses the implications that establishing a monetary union will have on regional monetary policy, fiscal policy, and trade and growth. It then makes an assessment of how far the region has come in preparing itself for monetary union before going on to suggest a number of policy actions that will facilitate the creation of the necessary economic and political environment conducive to sustainable convergence amongst Caricom members, and by extension a successful monetary union. In this regard, the paper emphasizes the need for adjusting and enhancing the convergence criteria, establishing ex-ante a set of fiscal rules with credible sanctions against non-conformers, and giving greater independence to central banks. Ultimately, however, it also recognizes that the initiative will never actually be launched unless leaders of Caricom nations make the requisite political commitment to a union that binds them not only monetarily, but fiscally too. 1 This should be considered a working paper, written to elicit comments and further debate in the subject area. Th