This paper studies the economic costs of hurricanes in the Caribbean by constructing a
novel dataset that combines a detailed record of tropical cyclones’ characteristics with
reported damages. I estimate the relation between hurricane wind speeds and damages in
the Caribbean; finding that the elasticity of damages to GDP ratio with respect to
maximum wind speeds is three in the case of landfalls. The data show that hurricane
damages are considerably underreported, particularly in the 1950s and 1960s, with
average damages potentially being three times as large as the reported average of 1.6
percent of GDP per year. I document and show that hurricanes that do not make landfall
also have considerable negative impacts on the Caribbean economies. Finally, I estimate
that the average annual hurricane damages in the Caribbean will increase between 22 and
77 percent by the year 2100, in a global warming scenario of high CO2 concentrations and
high global temperatures.
Mr. Sebastian Acevedo Mejia, Lu Han, Miss Marie S Kim, and Ms. Nicole Laframboise
This paper studies the role of airlift supply on the tourism sector in the Caribbean. The
paper examines the relative importance of U.S.-Caribbean airlift supply factors such as the
number of flights, seats, airlines, and departure cities on U.S. tourist arrivals. The possible
endogeneity problem between airlift supply and tourist arrivals is addressed by using a
structural panel VAR and individual country VARs. Among the four airlift supply
measures, increasing the number of flights is found to be the most effective way to boost
tourist arrivals on a sustained basis. As a case study, the possible crowding effect of
increasing the number of U.S. flights to Cuba is investigated and, based on past
observations, we find no significant impact on flights to other Caribbean countries. The
impact of natural disasters on airlift supply and tourist arrivals is also quantified.
This consultation paper explains that in addition to the adverse impact of the global slowdown and higher commodity prices, St. Vincent and the Grenadines has been hit by two successive natural disasters in the last 12 months. As a result, real GDP has been contracted by a cumulative 4.7 percent since 2007 and is expected to remain slightly negative this year. Growth is expected to improve gradually toward its potential, but significant downside risks remain, largely related to developments in the global economy.
This study measures the impact of changing economic conditions in OECD countries on tourist arrivals to countries/destinations in Latin America and the Caribbean. A model of utility maximization across labor, consumption of goods and services at home, and consumption of tourism services across monopolistically competitive destinations abroad is presented. The model yields estimable equations arrivals as a function of OECD economic conditions and the elasticity of substitution across tourist destinations. Estimates suggest median tourism arrivals decline by at least three to five percent in response to a one percent increase in OECD unemployment, even after controlling for declines in OECD consumption and output gaps. Arrivals to individual destination are driven by differing exposure to OECD country groups sharing similar business cycle characteristics. Estimates of the elasticity of substitution suggest that tourism demand is highly price sensitive, and that a variety of costs to delivering tourism services drive market share losses in uncompetitive destinations. One recent cost change, the 2009 easing of restrictions on U.S. travel to Cuba, supported a small (countercyclical) boost to Cuba’s arrivals of U.S. non-family travel, as well as a pre-existing surge in family travel (of Cuban origin). Despite the US becoming Cuba’s second highest arrival source, Cuban policymakers have significant scope for lowering the relatively high costs of family travel from the United States.
An opening of Cuba to U.S. tourism would represent a seismic shift in the Caribbean's tourism industry. This study models the impact of such a potential opening by estimating a counterfactual that captures the current bilateral restriction on tourism between the two countries. After controlling for natural disasters, trade agreements, and other factors, the results show that a hypothetical liberalization of Cuba-U.S. tourism would increase long-term regional arrivals. Neighboring destinations would lose the implicit protection the current restriction affords them, and Cuba would gain market share, but this would be partially offset in the short-run by the redistribution of non-U.S. tourists currently in Cuba. The results also suggest that Caribbean countries have in general not lowered their dependency on U.S. tourists, leaving them vulnerable to this potential change.
This paper on the Republic of Congo’s staff-monitored program (SMP) reports that the authorities and civil society pledged to work together to make resource management more transparent. The authorities have reached understandings with IMF staff on an SMP for April-September 2007. The SMP aims at making progress toward fiscal sustainability, enhancing public financial management, and improving governance and transparency. A solid track record of policy implementation in the context of the SMP would pave the way for discussions on a Poverty Reduction and Growth Facility arrangement to resume by end-2007.