Front Matter Page

© 2004 International Monetary Fund

October 2004

IMF Country Report No. 04/335

Eastern Caribbean Currency Union: Selected Issues

This Selected Issues paper for the Eastern Caribbean Currency Union (ECCU) was prepared by a staff team of the International Monetary Fund as background documentation for the periodic regional surveillance on the ECCU. It is based on the information available at the time it was completed on April 20, 2004. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the institutions or governments of the ECCU or the Executive Board of the IMF.

The policy of publication of staff reports and other documents by the IMF allows for the deletion of market-sensitive information.

To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to publicationpolicy@imf.org.

Copies of this report are available to the public from

International Monetary Fund • Publication Services

700 19th Street, N.W. • Washington, D.C. 20431

Telephone: (202) 623 7430 • Telefax: (202) 623 7201

E-mail: publications@imf.org • Internet: http://www.imf.org

Price: $15.00 a copy

International Monetary Fund

Washington, D.C.

Front Matter Page

INTERNATIONAL MONETARY FUND

EASTERN CARIBBEAN CURRENCY UNION

Selected Issues

Prepared by Paul Cashin, Jingqing Chai, Patrick Njoroge, Ruby Randall, Tobias Rasmussen, Pedro Rodriguez and Esther Suss (all WHD)

Approved by the Western Hemisphere Department

April 20, 2004

Contents

• I. Key Features of Caribbean Business Cycles

  • A. Introduction

  • B. Extracting and Defining Cycles

  • C. Comparison of Classical and Growth Cycles

  • D. Co-movement of Caribbean Business Cycles

  • E. Conclusions

• II. Natural Disasters and their Macroeconomic Implications

  • A. Introduction

  • B. The Incidence of Natural Disasters

  • C. The Macroeconomic Implications of Natural Disasters

  • D. Mitigating Natural Disasters

  • E. Summary of Findings

• III. Competitiveness in the ECCU: Measures of the Real Exchange Rate

  • A. Introduction

  • B. Analysis of Traditional Real Exchange Rate Measures

  • C. Real Exchange Rates Based on Customers and Competitors of the Tourism Sector

  • D. Conclusions

• IV. Eastern Caribbean Tourism: Developments and Outlook

  • A. Introduction

  • B. Recent Tourism Developments

  • C. Caribbean Tourism: Trends in Competitiveness

  • D. Policy Implications and Conclusions

• V. Public Debt Accumulation in the ECCU

  • A. Introduction

  • B. Decomposing Public Sector Debt Dynamics

  • C. Results of Debt Decomposition

  • D. Worsening of the Fiscal Accounts: Why?

  • E. Conclusions

• VI. The Role of the Banking Sector in the ECCU

  • A. Introduction

  • B. Banking Sector Links to the Real Sector

  • C. Fiscal-Financial Linkages and Vulnerabilities

  • D. Policy Implications and Conclusions

• VII. Regional Integration and Trade Regimes

  • A. Introduction

  • B. Regional Integration in the ECCU

  • C. Trade Regimes and Practices in the ECCU