Taming Volatility : Fiscal Policy and Financial Development for Growth in the Eastern Caribbean
The report is structured in four chapters that outline the main sources of volatility in the region and suggest ways to mitigate the impacts of that volatility on growth. Chapter one presents stylized facts associated with the growth performance of...
| Main Authors: | , |
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| Format: | Report |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2016
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2016/06/26539208/taming-volatility-fiscal-policy-financial-development-growth-eastern-caribbean http://hdl.handle.net/10986/24925 |
| Summary: | The report is structured in four
chapters that outline the main sources of volatility in the
region and suggest ways to mitigate the impacts of that
volatility on growth. Chapter one presents stylized facts
associated with the growth performance of the Eastern
Caribbean over the last 40 years. It contrasts the growth
performance of the OECS with the rest of the Latin America
region and shows that the two groups of countries have shown
significant heterogeneity over the business cycle. The
chapter also highlights some of the factors that might be
responsible for the volatility of growth in the OECS,
including the region’s exposure to natural disasters, high
debt, and adverse developments in the financial sector.
Chapter two provides new evidence on output volatility and
the cyclicality of fiscal policy in the OECS and discusses
why countries are better off avoiding a pro-cyclical fiscal
policy stance. Chapter three assesses the level of financial
development in the region as well as the relationship
between financial development, growth, and volatility. The
chapter also explores critical policy options to strengthen
financial development in the OECS. Chapter four assesses
empirically the combined effects of terms of trade
volatility, fiscal policy (pro) cyclicality, and financial
development on growth in the OECS and other countries using
two complementary modeling approaches. First, through an
econometric model using panel data for 175 countries over
the period 1980-2010. Second, by using impulse-response
analysis based on a structural model of the business cycle
in the OECS region. |
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