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Mr. David Robinson, Mr. Paul Cashin, and Ms. Ratna Sahay

Abstract

This book sets out the economic challenges facing the island nations of the Caribbean and presents policy options to ameliorate external shocks and embark firmly on a sustained growth path. While the countries of the Eastern Caribbean Currency Union that are the focus of the book have enjoyed a sustained period of price and exchange rate stability, they have been buffeted in recent years by adverse shocks, including the erosion of trade preferences, declines in official foreign assistance, and frequent natural disasters. Strengthening their growth performance will require design of a multifaceted strategy that integrates the Caribbean with the global economy, facilitates an economic transformation from agriculture to tourism, fosters greater regional cooperation, and preserves macroeconomic stability. This volume examines the critical issues that are part of that process, including fiscal and financial sector policy, management of external flows, trade integration and tourism, macroeconomic cycles and volatility, and the economic implications of natural disasters.

International Monetary Fund

This paper examines the staff report for Dominica’s Request for Disbursement under the Rapid Credit Facility. Dominica has been hit by a number of natural disasters during July–September 2011. Although the impact on growth may be limited owing to the localized nature of the damage, the disasters will have large fiscal and balance of payment costs as the government undertakes the necessary rehabilitation work, including relocation of people from the affected areas. Medium-term prospects remain subdued owing to lack of clear growth drivers, with potential growth estimated at about 2 percent.

International Monetary Fund. Western Hemisphere Dept.

This Selected Issues paper presents a proposal for the creation of savings funds (SF) for rehabilitation and reconstruction after natural disasters (ND) in Dominica. A Monte Carlo experiment is used to calibrate the size of the SF, based on the distribution of ND fiscal shocks estimated from an empirical fiscal model. ND shocks are identified by controlling for other major sources of shock affecting the cyclical fluctuations of output, and government revenue and expenditure, and by calibrating the probability of ND consistent with their historical frequency. It is concluded that under the parameter calibrations proposed, the SF would be financially sustainable with a low probability of depletion.

International Monetary Fund

This Selected Issues paper on the Eastern Caribbean Currency Union (ECCU) underlies key features of business cycles. To obtain new measures of classical and growth cycles, simple rules were applied to date turning points in the classical business cycle, and a recently developed frequency domain filter was used to estimate the growth cycle. At the regional level, the ECCU countries are facing two shocks, i.e., the depreciation of the U.S. dollar and the depreciation of the Dominican Republic’s peso. The countries of the ECCU have experienced modest erosion in their price and nonprice competitiveness.

International Monetary Fund

Dominica was struck by Hurricane Dean during August 16–17, 2007. A recent earthquake also underscores the vulnerability of the economy to natural disasters. Output growth slowed during the first half of 2007 as tourist arrivals stagnated across the region. Inflation was 3½ percent in July, reflecting higher energy and imported food prices. Structural reforms have continued after the expiration of the poverty reduction growth facility (PRGF) arrangement. The fiscal impact of the hurricane would be largely on the expenditure side.

International Monetary Fund. Strategy, Policy, &, Review Department, International Monetary Fund. Western Hemisphere Dept., and International Monetary Fund. Asia and Pacific Dept

This paper discusses how comprehensive disaster resilience strategies can help reduce the human and economic cost for countries vulnerable to natural disasters.

International Monetary Fund. Western Hemisphere Dept.
This IMF Staff Report for the 2016 Discussion on Common Policies of Eastern Caribbean Currency Union (ECCU) Member Countries highlights that the regional recovery in ECCU is gaining ground, supported by continued low oil prices, strong tourism arrivals, and robust citizenship-by-investment receipts. Risks to the near-term outlook are balanced, but growth in the ECCU continues to be hindered by weak competitiveness, banking sector fragilities, susceptibility to natural disasters, and large public debt. The Executive Directors have encouraged the authorities to press ahead with sound macroeconomic policies and structural reforms to decisively address these issues and strengthen the conditions for robust long term growth.