Economic Resiliency to Macro-Economic Shocks of Two SIDS: United States Virgin Islands and Aruba, Having Similar Economies and Dissimilar Economic Policies.

Abstract

The economic vulnerability of small-island developing states (SIDS) to macroeconomic shocks has long been recognized. One significant factor is the perception that their economic health is dominated by external factors over which their local governments have no control. The SIDS government economic policies are inconsequential, according to this perception, in the face of macroeconomic shocks, as these regional economies will drown in the macroeconomic tsunami. This study compares the economic impact on the United States Virgin Islands (USVI) and Aruba, two SIDS whose small-business, entrepreneurially-focused economies that are largely dependent on tourism, to two identical macroeconomic shocks. The United States Virgin Islands (USVI) and Aruba are island states with many similarities, including similar economies, but differ from one another on their approach to economic growth, development, or industrialization. This study shows that the two states demonstrated significantly different levels of economic resiliency in face of nearly identical macroeconomic shocks, inferring that regional economic policies, counter to the common perception, can indeed positively impact SIDS economic outcomes.