The Eastern Caribbean Currency Union: Would a Fiscal Insurance Mechanism Mitigate National Income Shocks?
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
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.
Series:
Working Paper No. 2012/017
Subject:
Disposable income Income shocks Income tax systems National accounts Personal income Revenue administration Taxes
English
Publication Date:
January 1, 2012
ISBN/ISSN:
9781463931223/1018-5941
Stock No:
WPIEA2012017
Pages:
23
Please address any questions about this title to publications@imf.org