CARIFORUM and UK EPA Study

With the inclusion of productive capacity, the growth of the labor force (LFG) is no longer significant, but the productive capacity index (PVI) is highly significant at the conventional level. GDP growth (GDPG), openness (OP) and liquidity (INT) are equally significant at conventional levels. Recall that liquidity—deposit interest rate—is a proxy for the use of credit by the private sector to facilitate international trade in the respective countries; higher rates conventionally discourage borrowing by the private sector, especially small businesses that are so numerous in developing economies. Deposit interest rate is the rate paid by commercial or similar banks for demand, time, or savings deposits. The terms and conditions attached to these rates differ by country, however, limiting their comparability. Data for productive capacity is limited because of missing values for two countries, Antigua, and St. Kitts. The averages of the index and the human capital component are utilized as proxies to prevent or minimize the loss of generality. Accordingly, the sample size of the regression is readjusted because of data limitations. Information is only considered from 2008 to 2018, which modifies the total observations to 154. The determinants of the average volume of trade are reported below:

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