IMF Working Papers

This paper analyzes trade patterns across the Caribbean Community (CARICOM)—15 Caribbean countries—and makes three main contributions. First, it provides a unified empirical assessment of Caribbean external connectivity by jointly analyzing goods trade, tourism flows, and cross-border banking linkages within a consistent gravity-model framework. Second, it presents new evidence on the role of physical connectivity—shipping and air transport—in shaping both import source concentration and tourism inflows, drawing on granular bilateral trade, tourism, and flight capacity data. Third, it shows that, while financial connectivity matters in a global context, it is not the primary binding constraint for Caribbean economies; instead, limited physical connectivity emerges as the more decisive factor shaping trade patterns and external vulnerabilities.