What are the Fiscal Limits for the Developing Economies of Central America and the Caribbean?

Abstract

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Fiscal Sustainability in the Caribbean: An Econometric Analysis

“…The issue of fiscal sustainability has received increasing attention in Caribbean countries following the 2008-2009 global financial crisis and the more recent commodity price shocks of 2014-2015. These exogeneous shocks, combined with natural hazards such as tropical storms and floods, inadequate policy responses, and limited institutional arrangements to guide corrective measures, have contributed to persistent budgetary imbalances leading to increasing debt ratios in some Caribbean countries (see Acevedo, Cebotari, and Turner-Jones, 2013;Alleyne, Ötker, Ramakrishnan, and Srinivasan, 2017;Fajgenbaum and Loser, 2018;Samaké and Spatafora, 2012;Villafuerte, Lopez-Murphy, and Ossowski, 2010;Koetsier, 2017;Medina, 2010;Ramirez and Wright, 2017). The majority of Caribbean countries have relatively high debt ratios: the simple average of the general government debt-to-GDP ratio for the Caribbean increased from 66.4 percent in 2008 to 76.6 percent in 2017, ranging from 42 percent to 157 percent for countries in the region.…”

Fiscal Sustainability in the Caribbean: An Econometric Analysis

“…The issue of fiscal sustainability has received increasing attention in Caribbean countries following the 2008-2009 global financial crisis and the more recent commodity price shocks of 2014-2015. These exogeneous shocks combined with natural hazards such as tropical storms and floods, inadequate policy responses and limited institutional arrangements to guide corrective measures have contributed to persistent budgetary imbalances leading to increasing debt ratios in some Caribbean countries (see Acevedo, Cebotari, and Turner-Jones, 2013;Alleyne, Ötker, Ramakrishnan, and Srinivasan, 2017;Fajgenbaum and Loser, 2018;Samaké and Spatafora, 2012;Villafuerte, Lopez-Murphy, and Ossowski, 2010;Koetsier, 2017;Medina, 2010;Ramirez and Wright, 2017). The majority of countries have debt ratios that are above the negative debt-growth threshold of 60 percent of GDP as suggested by Greenidge et al (2012): the simple average of the general government debt to GDP ratio for the Caribbean increased from 66.4 percent in 2008 to 76.6 percent in 2017, ranging from 42 percent to 157 percent for countries in the region.…”

Essays in Monetary Policy With Risky Assets

“…40 Bi, Shen and Yang (2016) estimate γ τ = 0.047 for Argentina using Bayesian methods in a sample covering 2004Q1:2015Q2. Ramirez and Wright (2017) calculate fiscal limits for 18 economies in Central America and the Caribbean while calibrating γ τ between 0.26 (Guatemala) and 0.69 (Belize). Overall, we assess that our calibration is in line with the literature, although it should be taken with a grain of salt.…”