Abdullah Al-Hassan, Mary E. Burfisher, Mr. Julian T Chow, Ding Ding, Fabio Di Vittorio, Dmitriy Kovtun, Arnold McIntyre, Ms. Inci Ötker, Marika Santoro, Lulu Shui, and Karim Youssef
Deeper economic integration within the Caribbean has been a regional policy priority since the establishment of the Caribbean Community (CARICOM) and the decision to create the Caribbean Single Market and Economy (CSME). Implementation of integration initiatives has, however, been slow, despite the stated commitment of political leaders. The “implementation deficit” has led to skepticism about completing the CSME and controversy regarding its benefits. This paper analyzes how Caribbean integration has evolved, discusses the obstacles to progress, and explores the potential benefits from greater integration. It argues that further economic integration through liberalization of trade and labor mobility can generate significant macroeconomic benefits, but slow progress in completing the institutional arrangements has hindered implementation of the essential components of the CSME and progress in economic integration. Advancing institutional integration through harmonization and rationalization of key institutions and processes can reduce the fixed costs of institutions, providing the needed scale and boost to regional integration. Greater cooperation in several functional policy areas where the region is facing common challenges can also provide low-hanging fruit, creating momentum toward full integration as the Community continues to address the obstacles to full economic integration.
Co-movement (synchronicity) in inflation rates among a set of 13 emerging and developing countries in Asia is shown to be strongest for the food component, partly due to common rainfall shocks—a result which the paper terms the ‘monsoon effect.’ Economies with higher trade integration and co-movement in nominal effective exchange rates also experience greater food-inflation co-movement. By contrast, cross-country co-movement in core inflation is weak and the aforementioned determinants have little explanatory power, suggesting a prominent role for idiosyncratic domestic factors in driving core inflation. In the context of the growing literature on the globalization of inflation, these results suggest that common weather patterns are partly responsible for any role played by a so-called ‘global factor’ among inflation rates in emerging and developing economies, in Asia at least.
The economic recovery in sub-Saharan Africa is expected to continue, but at a slower pace than envisaged in October 2018. This weaker outlook reflects domestic and external challenges. On the external side, the global expansion is losing momentum, including in China and the euro area, trade tensions remain elevated, global financial conditions have tightened, and commodity prices are expected to remain low. On the domestic front, security challenges, climate shocks, and policy uncertainty are hampering investment and weighing on economic prospects in several countries. Under current policies, medium-term average growth for the region is expected to continue to fall well short of what is needed to absorb the new entrants to the labor force and to deliver limited gains in living standards.
Once upon a time, in the 1990s, it was widely agreed that neither Europe nor the United
States was an optimum currency area, although moderating this concern was the finding that
it was possible to distinguish a regional core and periphery (Bayoumi and Eichengreen,
1993). Revisiting these issues, we find that the United States is remains closer to an optimum
currency area than the Euro Area. More intriguingly, the Euro Area shows striking changes
in correlations and responses which we interpret as reflecting hysteresis with a financial
twist, in which the financial system causes aggregate supply and demand shocks to reinforce
each other. An implication is that the Euro Area needs vigorous, coordinated regulation of its
banking and financial systems by a single supervisor—that monetary union without banking
union will not work.