Cover IMF Working Papers
Global and Regional Spillovers to Pacific Island Countries
Author: Mr. Yiqun Wu, Ms. Patrizia Tumbarello, and Niamh Sheridan
Series:
IMF Working Papers
Volume/Issue:
Volume 2012: Issue 154
Language:
English
Publication Date:
01 Jun 2012
DOI:
https://doi.org/10.5089/9781475504491.001
ISBN:
9781475504491
ISSN:
1018-5941
Pages:
41
Keywords:
WP; Pacific island country; IMF staff calculation; commodity; commodity importer; Pacific islands; spillover; downside scenarios; commodity prices; commodity exporter; commodity price; business cycle; PIC importer; Extra-budgetary funds; Spillovers; Remittances; Commercial banks; Global; Australia and New Zealand
Legal-disclaimer:
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.
Download PDF (2 MB) Download Epub
Regional integration of Pacific Island countries (PICs) with Australia, New Zealand, and emerging Asia has increased over the last two decades. PICs have become more exposed to the region’s business cycles, and spillovers from regional economies are more important for PICs than from advanced economies outside the region. While strong linkages with Asia would help in the event of a global downturn, PICs remain particularly vulnerable to global commodity price shocks. In this paper, we use a Vector Error Correction Model (VECM) for each PIC to gauge the impact of global and regional growth spillovers. The analysis reveals that the impact on PICs’ growth from an adverse oil shock would be substantial, and in some cases even larger than from a negative global demand shock. We also assess the spillovers to the financial sector from the deterioration of the global outlook. PICs should continue to rebuild policy buffers and implement growth-oriented structural reforms to ensure sustained and inclusive growth.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund