The impact of full removal of capital account controls on foreign direct investment (FDI) flows for Barbados using an impulse response function

This paper seeks to examine the impact of full removal of capital account controls on real FDI flows for Barbados using an impulse response function. The results show that considerable volatility takes place in the first five years but since this activity occurs above the original equilibrium, the outturns are beneficial to Barbados. A new equilibrium is reached during the twelfth year with net real FDI flows expanding by $3 million. Since the new equilibrium is higher than the former equilibrium, the data for this study suggest that Barbados will attract additional net FDI inflows if capital controls are eliminated.