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The Eastern Caribbean Currency Union: Would a Fiscal Insurance Mechanism Mitigate National Income Shocks?
Author:
Mr. Paul Cashin
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and
Mr. Antonio Lemus
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Series:
IMF Working Papers
Volume/Issue:
Volume 2012: Issue 017
Language:
English
Publication Date:
01 Jan 2012
DOI:
https://doi.org/10.5089/9781463931223.001
ISBN:
9781463931223
ISSN:
1018-5941
Pages:
23
Keywords:
WP; Fiscal insurance mechanism; income shocks; income tax revenue; transfers; Eastern Caribbean Currency Union; ECCU member; insurance mechanism; ECCU growth; ECCU country; ECCU-member country; Personal income; Income tax systems; Disposable income; Caribbean
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper studies the nature of the shocks affecting the Eastern Caribbean Currency Union (ECCU), and examines whether a hypothetical Eastern Caribbean fiscal insurance mechanism could insure member countries of the union against asymmetric national income shocks. The empirical results suggest that a one dollar reduction in an ECCU member country's per capita personal income could trigger, through reduced income taxes and increased transfers, flows equivalent to about 7 percent of the initial income shock. Each member of the currency union could benefit as well, although the extent of shock mitigation differs across individual countries.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund