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This paper analyzes the business cycle characteristics of the economies of the Organization of Eastern Caribbean States using a model of a small open economy subject to interest rate and fiscal expenditure shocks and financial frictions. The paper shows that macroeconomic aggregates in this region are quite volatile, with consumption exhibiting higher volatility than gross domestic product. The analysis also finds that in these economies real interest rates are highly volatile and strongly countercyclical with gross domestic product and other macroeconomic aggregates. Similarly, fiscal expenditures show significant volatility, but are pro-cyclical with gross domestic product. The results suggest two major directions for designing policies to help reduce the volatility experienced by the Organization of Eastern Caribbean States economies. First, Organization of Eastern Caribbean States countries should seek a greater openness to international financial markets, which could help them smooth out the effects of fundamental shocks, such as shocks to technology and terms of trade, and shocks associated with natural hazards. However, this removal of international financial barriers needs to be accompanied by improvements in domestic financial conditions, as this would reduce the vulnerability of these economies to country risk premium shocks. Second, the Organization of Eastern Caribbean States region should try harder to move toward a countercyclical fiscal policy stance, as this could help to stabilize the domestic risk premium and cushion the negative effects of interest rate shocks on economic activity, hence reducing volatility.

Os "mercados" constituíram-se numa das maiores "caixas-pretas" da atualidade. A eles atribuem-se poderes demiúrgicos que, de maneira misteriosa, determinam os destinos das sociedades contemporâneas. O presente texto vale-se de algumas peculiaridades da situação brasileira recente, em especial das formas como a crise foi aqui enfrentada, para sugerir um caminho analítico capaz de objetivar a zona do espaço social que chamamos de mercado e mostrar alguns de seus desenvolvimentos recentes, de modo a tornar essa realidade compreensível sociologicamente. Nesse sentido, a exploração do "caso brasileiro" é excepcionalmente elucidativa por mostrar uma cronologia que nuança consideravelmente a até então taked for granted autonomia do mundo financeiro. The 'markets' comprise one of the largest 'black boxes' of the present era, attributed with god-like powers that mysteriously determine the fates of contemporary societies. In this article I make use of some of the peculiarities of this situation in Brazil, especially the forms in which the financial crisis has been confronted, to suggest an analytic path capable of objectifying the zone of social space that we call the market and to show some of its recent developments, thereby rendering this reality sociologically comprehensible. In this sense the exploration of the 'Brazilian case' is exceptionally elucidative in terms of revealing a chronology that provides a much more nuanced view of the taken for granted autonomy of the financial world.

Economists seeking explanations for the global financial crisis of 1997-99 are reaching consensus that a major factor was weak financial institutions, which resulted in part from inadequate government regulations. At the same time many developing countries are struggling with an overregulated financial system-one that stifles innovation and the flow of credit to new entrepreneurs and that can stunt the growth of well-established firms. In particular, too many countries are relying excessively on capital adequacy standards, which are inefficient and sometimes counterproductive. The author argues that financial systems can be reformed successfully using a 'dynamic portfolio approach' aimed at managing the incentives and constraints that affect not only financial institutions exposure to risk but also their ability to cope with it. The article sets out general principles of financial regulation and shows how the dynamic portfolio approach can help countries deal with the special problems that arise during the transition to a more liberalized economy as well as those that arise in dealing with a financial crisis similar to the 1997 crisis in East Asia.