According to Mundell and Krugman a country can choose between two of three monetary policy options: a fixed exchange rate, capital mobility and monetary independence. Unlike the majority of studies in the literature a single country approach is employed to test this hypothesis. In particular, the paper focuses on the small open economy of Barbados. The country has maintained a fixed exchange rate regime since 1975 and is therefore perfect for testing the hypothesis under the assumption of a credibly pegged exchange rate regime