Caribbean Islands Table of Contents
Dominica was a member of the Caribbean Development Bank (CDB) and the Eastern Caribbean Central Bank (ECCB). The CDB provided financial facilities for infrastructure and development program activities either bilaterally or as a co-financing partner with the World Bank (see Glossary), AID, and other international agencies. The ECCB acted as a common central bank for the members of the Organisation of Eastern Caribbean States (OECS). Dominica and the six other members of the OECS have shared a common currency, the Eastern Caribbean dollar (EC$), since July 1976. The exchange rate has remained fixed at EC$2.7 per US$1.
The institutional arrangements of a shared common currency mean that decisions about exchange rates cannot be made by any one member nation. Given the differing production profiles of the OECS countries, the various national economic policy imperatives do not necessarily coincide either in objective, direction, or timing. When coupled with the difficulty of decision making within a regional institution, the arrangements concerning the ECD and the ECCB are major constraints on the effective use of the exchange rate as a tool of national economic policy. In Dominica's case, the constraints have led to the use of wage policy as an alternate tool of macroeconomic policy, a situation that can be domestically unpopular and can limit the ability of the government to direct economic growth. Throughout 1986 Dominica was able to mitigate the effect of a fixed exchange rate because of the strength of the pound sterling, the currency in which most foreign exchange earnings were earned.
Data as of November 1987