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The perception that inflation dynamics in Sub-Saharan Africa (SSA) are driven by supply shocks implies a limited role for monetary policy in influencing inflation in the short run. SSA's rapid growth, its integration with the global economy, changes in the policy frameworks, among others, in the last decade suggest that the drivers of inflation may have changed. We quantitatively analyze inflation dynamics in SSA using a Global VAR model, which incorporates trade and financial linkages among economies, as well as the role of regional and global demand and inflationary spillovers. We find that in the past 25 years, the main drivers of inflation have been domestic supply shocks and shocks to exchange rate and monetary variables; but that, in recent years, the contribution of these shocks to inflation has fallen. Domestic demand pressures as well as global shocks, and particularly shocks to output, however, have played a larger role in driving inflation over the last decade. We also show that country characteristics matter-the extent of oil and food imports, vulnerability to weather shocks, economic importance of agriculture, trade openness and policy regime, among others, help in explaining the role of shocks.

The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those ofthe IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.The paper reviews the development of offshore financial activities in the English-speaking Caribbean islands and takes stock of the size and status of these sectors today. In view of the heightened concerns of the international community about money laundering, the costs and risks to countries of having or establishing offshore sectors have risen considerably.

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. We investigate the extent of regional financial integration in the member countries of the Gulf Cooperation Council. The limited volume data available suggests that regional integration is non-negligible. Bahrain and Kuwait investments especially are oriented towards the region. The development of stock markets in the region will also improve the extent of financial integration. Interest rate data shows that convergence exists and that interest rate differentials are relatively short-lived-especially compared to the ECCU, another emerging market region sharing a common currency. Equities data using cross-listed stocks confirms that stock markets are fairly integrated compared to other emerging market regions, although financial integration is hampered by market illiquidity.

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This paper reviews the development of offshore financial activities in the English‐speaking Caribbean islands and takes stock of the size of these sectors today, and analyses the future prospects. A number of Caribbean jurisdictions are market leaders in the offshore products they offer and have identified the growth of this sector as a development strategy. Established centres in the Bahamas, Barbados and Cayman Islands have managed to become global players and have generated sizeable gains in employment and income. However, in view of the heightened concerns by the international community about money laundering and more recently, terrorist financing, the costs of compliance and risks to countries of having or establishing offshore sectors have risen considerably. This is particularly relevant to the newer entrants, with significant regulatory differences from international standards. The paper assesses the risks, benefits and costs of compliance with international best practices for established and newer offshore jurisdictions. The paper asks the questions whether offshore jurisdictions constitute a sustainable development strategy and concludes that for nascent jurisdictions, the gains are very small.

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper investigates the determinants of inflation in the Dominican Republic during 1991-2002, a period characterized by remarkable macroeconomic stability and growth. By developing a parsimonious and empirically stable error-correction model using quarterly observations, the paper finds that inflation is explained by changes in monetary aggregates, real output, foreign inflation, and the exchange rate. Long-run relationships in the money and traded-goods markets are found to exist, but only the disequilibrium from the money market exerts a significant impact on inflation. JEL Classification Numbers: E5, F41