Eastern Caribbean Currency Union : Would a Fiscal Insurance Mechanism Mitigate National Income Shocks? ISBN: 9781463980351 Platform/Publisher: Ebook Central / International Monetary Fund Digital rights:Users: Unlimited; Printing: Limited; Download: 7 Days at a Time Subjects: Economics; Business/ Management;
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.