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### I. Introduction
- Small island states in the Eastern Caribbean Currency Union (ECCU) exhibit significant volatility in output and government revenue, driven by low output diversification (mainly tourism) and dependence on key commodity imports.
- Natural disasters (NDs) (tropical cyclones, earthquakes, volcanic eruptions) impose significant macroeconomic losses; Cantelmo, Melina and Papageorgiou (2019) estimate welfare loss from NDs equivalent to a permanent decline in consumption of 1.6 percent of GDP.
- Government spending in ECCU countries has been procyclical, compounding supply-driven volatility; the cyclical component of output has a strong positive correlation with spending in most ECCU countries.
- Financing constraints and political economy factors motivate self-insurance via stabilization funds (SF) or a regional stabilization fund (RSF): limited access to global financial markets, predominance of official multilateral and bilateral loans, narrow domestic financial markets, and insufficient/expensive disaster insurance (e.g., CCRIF under-insurance due to high reinsurance costs).
- Purpose of the paper: quantify saving flows and size of establishing an RSF in the ECCU for government consumption and investment stabilization under empirically plausible saving-investment rules; compare RSF with sum of individual country SFs; integrate RSF flows with probabilistic public debt simulations.
- Simulation assumptions: a share of pro-cyclical government consumption increases during booms is saved; savings finance public investment during recessions, stabilizing consumption and smoothing/increasing investment.

### II. Methodology
- Empirical model: country-level unrestricted Vector Auto-regression Model (VAR):
  - Xt = γ0 + Σ_{k=1}^{p} γk Xt−k + εt
  - Endogenous variables: cyclical components of GDP; government tax revenue; non-tax revenue; current primary expenditures; capital expenditures.
  - Sample period: 1990-2019.
  - Endogenous variables expressed as shares of each indicator’s trend x̃it = xit / xit^trend.
  - εt ~ N(0, Ω).
- Monte-Carlo simulations:
  - Generate random shocks ε̂t+1,...,ε̂T with ετ = W vτ, vτ ~ N(0,1), Ω = W′W (Choleski).
  - Generate 1000 forecasts Xτ per country using simulated shocks.
  - Simulations mimic historical volatility, persistence, and co-movement; compute probability density functions for each endogenous variable by year.
- Conversion to percent of GDP:
  - Deterministic trends projected assuming all trends grow at constant rate from endpoint of estimated trend; x_{i,t+l}^trend = x_{i,t} (1+g)^{l−t}, l = 0,...,T.
  - Potential growth rate assumption denoted g. Starting points set at constant prices of 2019.
- Saving and investment rules vis-à-vis SF:
  - Savings: S_t = φ [G_t − G_t^trend] if G_t − G_t^trend > 0; otherwise S_t = 0. G_t is current primary expenditure.
  - Investment financed from SF: I_t = σ [X_t − X_t^trend] if X_t − X_t^trend < 0; otherwise I_t = 0. X_t is government investment execution.
  - SF stock evolution: SF_{t+1} = (1 + i_t) SF_t + (S_t − I_t), where i_t is interest rate on savings.
  - If SF depleted, investment financing flows to budget constrained by remaining SF resources.
- Public debt dynamics integrated:
  - D_{t+l+1} = (1 + i_{t+l+1}) D_{t+l} − PB_{t+l} + (S_{t+l} − I_{t+l}); D_{t+l} > 0.
  - Implicit interest rate i_t = interest expenditures_t / public debt_{t−1}.
- SF sustainability constraint (transversality):
  - Solve for σ ∈ [0,1] such that E_t[SF_{T+N} / Y_{T+N}] = SF_T / Y_T, with terminal depletion probability π at horizon T+N.
  - Parameters (φ, π, N) are policy choices reflecting risk aversion and desired depletion probability.
- RSF size computed using aggregated output, revenue, and expenditure across countries; aggregation reduces pronounced cycles compared with sum of individual cycles due to imperfect correlation.

### III. Calibration
- Potential output growth set according to long-term projected growth rates in the IMF WEO (2019 WEO data used).
- Implicit interest rate on public debt set as ratio of government interest expenditure to previous year’s debt stock.
- Fiscal consolidation amount set as cumulative improvements in primary balances per WEO projections over 5 years.
- Inflow/outflow SF parameters:
  - φ (share of expenditure above trend saved) set exogenously at 1.000 for illustrative simulations (all expenditure above trend saved).
  - σ (share of government investment below trend financed with SF) solved endogenously to meet SF transversality given φ.
- Calibration parameters (preserved exactly):
  - g GDP potential growth, percent:
    - Antigua and Barbuda: 2.777
    - Dominica: 1.642
    - Grenada: 3.051
    - St. Kitts and Nevis: 2.642
    - St. Lucia: 1.847
    - St. Vincent and the Grenadines: 1.869
    - ECCU: 2.294
  - i Implicit interest rate on public debt, percent:
    - Antigua and Barbuda: 3.176
    - Dominica: 2.333
    - Grenada: 3.037
    - St. Kitts and Nevis: 2.363
    - St. Lucia: 5.250
    - St. Vincent and the Grenadines: 3.183
    - ECCU: 3.615
  - PB Cumulative fiscal consolidation, percent of GDP:
    - Antigua and Barbuda: -1.760
    - Dominica: 0.468
    - Grenada: -0.888
    - St. Kitts and Nevis: -5.979
    - St. Lucia: 0.724
    - St. Vincent and the Grenadines: 0.569
    - ECCU: -0.330
  - φ Share of expenditure above trend saved: 1.000 for all countries and ECCU.
  - S Inflows into the Fund from the budget, percent of GDP (average across simulations, per year):
    - Antigua and Barbuda: 0.909
    - Dominica: 0.558
    - Grenada: 0.412
    - St. Kitts and Nevis: 0.562
    - St. Lucia: 0.308
    - St. Vincent and the Grenadines: 0.273
    - ECCU: 0.208
  - σ Share of government investment below trend financed with SF:
    - Antigua and Barbuda: 1.273
    - Dominica: 0.276
    - Grenada: 0.434
    - St. Kitts and Nevis: 1.353
    - St. Lucia: 0.650
    - St. Vincent and the Grenadines: 0.488
    - ECCU: 0.404
  - I Outflows of the Fund to the budget parameters, percent of GDP:
    - Antigua and Barbuda: 0.545
    - Dominica: 0.540
    - Grenada: 0.344
    - St. Kitts and Nevis: 0.408
    - St. Lucia: 0.263
    - St. Vincent and the Grenadines: 0.236
    - ECCU: 0.099
  - Avg. annual probability of SF depletion:
    - Antigua and Barbuda: 0.009
    - Dominica: 0.010
    - Grenada: 0.050
    - St. Kitts and Nevis: 0.032
    - St. Lucia: 0.049
    - St. Vincent and the Grenadines: 0.051
    - ECCU: 0.001
- Illustrations show off-sample simulated dynamics: fund stock evolution, budget saving into SF, investment financing with SF, and increased public investment with SF (percent of GDP dynamics and EC$ million investment changes).

### IV. Results
A. Pro-cyclicality of Government Spending
- VAR impulse-response analysis:
  - Government consumption (current primary spending) and public investment increase when output and revenue are high — confirming procyclicality.
  - Procyclical current spending crowds-out public investment over the cycle via downward rigidity of consumption and limited financing in downturns.
- Country cycles are positively correlated (synchronized) due to common external shocks: tourism dependence, oil import reliance, remittance flows, and exposure to global monetary/financial conditions affecting the pegged Eastern Caribbean dollar.
- Cross-country asymmetries exist and enable risk pooling benefits despite synchronization.

B. Regional Saving from Risk Pooling (RSF)
- RSF size requirement varies with targeted probability of depletion; example findings:
  - For net inflow-outflow saving and investment flows of about ½ percent of GDP each year:
    - RSF could be set at average level as low as 2 percent of regional GDP but with probability of depletion of 10 percent.
    - Reducing probability of RSF depletion to 0.001 requires a level of 4.5 percent of regional GDP.
- RSF reduces dispersion of public debt outcomes and strengthens currency board sustainability by enabling implicit cross-country financing and lowering required national debt issuance.
- Risk-pooling savings magnitude:
  - RSF size is about ½ of the size of the sum of individual countries’ SFs for the same saving/withdrawal flows.
  - Example: for probability of SF depletion at 0.01 and φ = 1, estimated RSF ≈ 5 percent of regional GDP while sum of individual SFs ≈ 10 percent of regional GDP.
- All countries benefit from pooling: individual country estimated SF sizes exceed their allotted regional shares, yet RSF suffices due to implicit cross-country transfers.
- Increase in public investment with RSF:
  - Under RSF with depletion probability of 0.01, ECCU countries would increase public investment in the range of 0.5–1.5 percent of GDP per year on average.
  - Additional output growth dividends and private investment crowding-in expected but not modeled.
- Size requirement table (Size Requirement of Regional and Individual Country Stabilization Funds, in percent of regional GDP). Table entries present country and regional SF sizes for targeted probabilities of SF depletion; contributions to RSF allocated by shares in sum of individual-country SFs:
  - Antigua and Barbuda: 1.79 / 0.90 / 2.69 / 1.33 / 4.75 / 2.29 / 6.83 / 3.12
  - Dominica: 0.34 / 0.17 / 0.49 / 0.24 / 0.71 / 0.34 / 0.90 / 0.41
  - Grenada: 0.39 / 0.20 / 0.56 / 0.28 / 0.93 / 0.45 / 1.35 / 0.62
  - St. Kitts and Nevis: 0.46 / 0.23 / 0.66 / 0.33 / 1.09 / 0.53 / 1.55 / 0.71
  - St. Lucia: 0.59 / 0.30 / 0.90 / 0.44 / 1.55 / 0.75 / 2.13 / 0.97
  - St. Vincent and the Grenadines: 0.23 / 0.11 / 0.32 / 0.16 / 0.52 / 0.25 / 0.71 / 0.32
  - ECCU: 3.79 / 1.90 / 5.63 / 2.78 / 9.55 / 4.61 / 13.46 / 6.15
- Public debt fan charts and confidence intervals illustrated: RSF lowers regional debt dispersion; example confidence bands at 95 percent, 90 percent, 75 percent, 50 percent shown in simulations.

### V. Concluding Remarks and Policy Considerations
- Stochastic simulations accounting for cross-country cyclical asymmetries indicate sizable welfare gains from stabilizing public consumption in booms and saving for investment in recessions.
- Regional pooling (RSF) requires roughly ½ the resources of the sum of individual SFs for equivalent saving-investment flows.
- RSF can:
  - Contain pro-cyclical government consumption and reduce macroeconomic volatility.
  - Provide fiscal space for investment during recessions, enabling average public investment increases of 0.5–1.5 percent of GDP per year.
  - Reduce dispersion of public debt outcomes, supporting the regional currency board arrangement and regional financial stability.
- Preconditions and governance requirements for RSF success:
  - Strong governance framework ensuring transparency and incentive compatibility.
  - Assessment of fiscal sustainability prospects of members to ensure contributions will be available in downturns.
  - Transparent methodology for assessing cyclical revenue and spending positions, possibly with independent institution support.
  - Accounting mechanism for net-credit appropriation and clear access rules (e.g., whether members can be net-debtors of RSF).
  - Regional initiatives to establish minimum common standards for Fiscal Responsibility Frameworks and fiscal rules at the national level would be valuable.
- Long-run role: RSF could serve as a commitment device for fiscal prudence and cross-country peer monitoring to enforce saving in good times and determine withdrawal eligibility in bad times.

*Source: ECCB data, WEO, and IMF staff calculations.*

### REFERENCES _____________________________________________________________________________________________17

### wpiea2021191-print-pdf - REFERENCES _____________________________________________________________________________________________17

### I. Introduction
- Small island states in the Eastern Caribbean Currency Union (ECCU) exhibit significant volatility in output and government revenue, driven by low output diversification (mainly tourism) and dependence on key commodity imports.
- Natural disasters (NDs) (tropical cyclones, earthquakes, volcanic eruptions) impose significant macroeconomic losses; Cantelmo, Melina and Papageorgiou (2019) estimate welfare loss from NDs equivalent to a permanent decline in consumption of 1.6 percent of GDP.
- Government spending in ECCU countries has been procyclical, compounding supply-driven volatility; the cyclical component of output has a strong positive correlation with spending in most ECCU countries.
- Financing constraints and political economy factors motivate self-insurance via stabilization funds (SF) or a regional stabilization fund (RSF): limited access to global financial markets, predominance of official multilateral and bilateral loans, narrow domestic financial markets, and insufficient/expensive disaster insurance (e.g., CCRIF under-insurance due to high reinsurance costs).
- Purpose of the paper: quantify saving flows and size of establishing an RSF in the ECCU for government consumption and investment stabilization under empirically plausible saving-investment rules; compare RSF with sum of individual country SFs; integrate RSF flows with probabilistic public debt simulations.
- Simulation assumptions: a share of pro-cyclical government consumption increases during booms is saved; savings finance public investment during recessions, stabilizing consumption and smoothing/increasing investment.

### II. Methodology
- Empirical model: country-level unrestricted Vector Auto-regression Model (VAR):
  - Xt = γ0 + Σ_{k=1}^{p} γk Xt−k + εt
  - Endogenous variables: cyclical components of GDP; government tax revenue; non-tax revenue; current primary expenditures; capital expenditures.
  - Sample period: 1990-2019.
  - Endogenous variables expressed as shares of each indicator’s trend xt̃it = xit / xit^trend.
  - εt ~ N(0, Ω).
- Monte-Carlo simulations:
  - Generate random shocks ε̂t+1,...,ε̂T with ετ = W vτ, vτ ~ N(0,1), Ω = W′W (Choleski).
  - Generate 1000 forecasts Xτ per country using simulated shocks.
  - Simulations mimic historical volatility, persistence, and co-movement; compute probability density functions for each endogenous variable by year.
- Conversion to percent of GDP:
  - Deterministic trends projected assuming all trends grow at constant rate from endpoint of estimated trend; x_{i,t+l}^trend = x_{i,t} (1+g)^{l−t}, l = 0,...,T.
  - Potential growth rate assumption denoted g. Starting points set at constant prices of 2019.
- Saving and investment rules vis-à-vis SF:
  - Savings: S_t = φ [G_t − G_t^trend] if G_t − G_t^trend > 0; otherwise S_t = 0. G_t is current primary expenditure.
  - Investment financed from SF: I_t = σ [X_t − X_t^trend] if X_t − X_t^trend < 0; otherwise I_t = 0. X_t is government investment execution.
  - SF stock evolution: SF_{t+1} = (1 + i_t) SF_t + (S_t − I_t), where i_t is interest rate on savings.
  - If SF depleted, investment financing flows to budget constrained by remaining SF resources.
- Public debt dynamics integrated:
  - D_{t+l+1} = (1 + i_{t+l+1}) D_{t+l} − PB_{t+l} + (S_{t+l} − I_{t+l}); D_{t+l} > 0.
  - Implicit interest rate i_t = interest expenditures_t / public debt_{t−1}.
- SF sustainability constraint (transversality):
  - Solve for σ ∈ [0,1] such that E_t[SF_{T+N} / Y_{T+N}] = SF_T / Y_T, with terminal depletion probability π at horizon T+N.
  - Parameters (φ, π, N) are policy choices reflecting risk aversion and desired depletion probability.
- RSF size computed using aggregated output, revenue, and expenditure across countries; aggregation reduces pronounced cycles compared with sum of individual cycles due to imperfect correlation.

### III. Calibration
- Potential output growth set according to long-term projected growth rates in the IMF WEO (2019 WEO data used).
- Implicit interest rate on public debt set as ratio of government interest expenditure to previous year’s debt stock.
- Fiscal consolidation amount set as cumulative improvements in primary balances per WEO projections over 5 years.
- Inflow/outflow SF parameters:
  - φ (share of expenditure above trend saved) set exogenously at 1.000 for illustrative simulations (all expenditure above trend saved).
  - σ (share of government investment below trend financed with SF) solved endogenously to meet SF transversality given φ.
- Calibration results (parameter table values preserved exactly):
  - g GDP potential growth, percent:
    - Antigua and Barbuda: 2.777
    - Dominica: 1.642
    - Grenada: 3.051
    - St. Kitts and Nevis: 2.642
    - St. Lucia: 1.847
    - St. Vincent and the Grenadines: 1.869
    - ECCU: 2.294
  - i Implicit interest rate on public debt, percent:
    - Antigua and Barbuda: 3.176
    - Dominica: 2.333
    - Grenada: 3.037
    - St. Kitts and Nevis: 2.363
    - St. Lucia: 5.250
    - St. Vincent and the Grenadines: 3.183
    - ECCU: 3.615
  - PB Cumulative fiscal consolidation, percent of GDP:
    - Antigua and Barbuda: -1.760
    - Dominica: 0.468
    - Grenada: -0.888
    - St. Kitts and Nevis: -5.979
    - St. Lucia: 0.724
    - St. Vincent and the Grenadines: 0.569
    - ECCU: -0.330
  - φ Share of expenditure above trend saved: 1.000 for all countries and ECCU.
  - S Inflows into the Fund from the budget, percent of GDP (average across simulations, per year):
    - Antigua and Barbuda: 0.909
    - Dominica: 0.558
    - Grenada: 0.412
    - St. Kitts and Nevis: 0.562
    - St. Lucia: 0.308
    - St. Vincent and the Grenadines: 0.273
    - ECCU: 0.208
  - σ Share of government investment below trend financed with SF:
    - Antigua and Barbuda: 1.273
    - Dominica: 0.276
    - Grenada: 0.434
    - St. Kitts and Nevis: 1.353
    - St. Lucia: 0.650
    - St. Vincent and the Grenadines: 0.488
    - ECCU: 0.404
  - I Outflows of the Fund to the budget parameters, percent of GDP:
    - Antigua and Barbuda: 0.545
    - Dominica: 0.540
    - Grenada: 0.344
    - St. Kitts and Nevis: 0.408
    - St. Lucia: 0.263
    - St. Vincent and the Grenadines: 0.236
    - ECCU: 0.099
  - Avg. annual probability of SF depletion:
    - Antigua and Barbuda: 0.009
    - Dominica: 0.010
    - Grenada: 0.050
    - St. Kitts and Nevis: 0.032
    - St. Lucia: 0.049
    - St. Vincent and the Grenadines: 0.051
    - ECCU: 0.001
- Illustration: off-sample simulated dynamics show fund stock evolution, budget saving into SF, investment financing with SF, and increased public investment with SF (figures illustrate percent of GDP dynamics and EC$ million investment changes).

### IV. Results
A. Pro-cyclicality of Government Spending
- VAR impulse-response analysis indicates government consumption (current primary spending) and public investment increase when output and revenue are high — confirming procyclicality.
- Procyclical current spending crowds-out public investment over the cycle via downward rigidity of consumption and limited financing in downturns.
- Country cycles are positively correlated (synchronized) due to common external shocks: tourism dependence, oil import reliance, remittance flows, and exposure to global monetary/financial conditions affecting the pegged Eastern Caribbean dollar.
- Despite synchronization, cross-country asymmetries exist and enable risk pooling benefits.

B. Regional Saving from Risk Pooling (RSF)
- RSF size requirement varies with targeted probability of depletion; example findings:
  - For net inflow-outflow saving and investment flows of about ½ percent of GDP each year:
    - RSF could be set at average level as low as 2 percent of regional GDP but with probability of depletion of 10 percent.
    - Reducing probability of RSF depletion to 0.001 requires a level of 4.5 percent of regional GDP.
- RSF reduces dispersion of public debt outcomes and strengthens currency board sustainability by enabling implicit cross-country financing and lowering required national debt issuance.
- Risk-pooling savings magnitude:
  - RSF size is about ½ of the size of the sum of individual countries’ SFs for the same saving/withdrawal flows.
  - Example: for probability of SF depletion at 0.01 and φ = 1, estimated RSF ≈ 5 percent of regional GDP while sum of individual SFs ≈ 10 percent of regional GDP.
- All countries benefit from pooling: individual country estimated SF sizes exceed their allotted regional shares, yet RSF suffices due to implicit cross-country transfers.
- Increase in public investment with RSF:
  - Under RSF with depletion probability of 0.01, ECCU countries would increase public investment in the range of 0.5–1.5 percent of GDP per year on average.
  - Additional output growth dividends and private investment crowding-in expected but not modeled.
- Size requirement table (Size Requirement of Regional and Individual Country Stabilization Funds, in percent of regional GDP):
  - Prob. Depletion = 0.1 / Prob. Depletion = 0.05 / Prob. Depletion = 0.01 / Prob. Depletion = 0.001
  - Antigua and Barbuda: 1.79 / 0.90 / 2.69 / 1.33 / 4.75 / 2.29 / 6.83 / 3.12
  - Dominica: 0.34 / 0.17 / 0.49 / 0.24 / 0.71 / 0.34 / 0.90 / 0.41
  - Grenada: 0.39 / 0.20 / 0.56 / 0.28 / 0.93 / 0.45 / 1.35 / 0.62
  - St. Kitts and Nevis: 0.46 / 0.23 / 0.66 / 0.33 / 1.09 / 0.53 / 1.55 / 0.71
  - St. Lucia: 0.59 / 0.30 / 0.90 / 0.44 / 1.55 / 0.75 / 2.13 / 0.97
  - St. Vincent and the Grenadines: 0.23 / 0.11 / 0.32 / 0.16 / 0.52 / 0.25 / 0.71 / 0.32
  - ECCU: 3.79 / 1.90 / 5.63 / 2.78 / 9.55 / 4.61 / 13.46 / 6.15
  - (Notes: table entries present country and regional SF sizes for targeted probabilities of SF depletion; contributions to RSF allocated by shares in sum of individual-country SFs.)
- Public debt fan charts and confidence intervals illustrated: RSF lowers regional debt dispersion; example confidence bands at 95 percent, 90 percent, 75 percent, 50 percent shown in simulations.

### V. Concluding Remarks and Policy Considerations
- Stochastic simulations accounting for cross-country cyclical asymmetries indicate sizable welfare gains from stabilizing public consumption in booms and saving for investment in recessions.
- Regional pooling (RSF) requires roughly ½ the resources of the sum of individual SFs for equivalent saving-investment flows.
- RSF can:
  - Contain pro-cyclical government consumption and reduce macroeconomic volatility.
  - Provide fiscal space for investment during recessions, enabling average public investment increases of 0.5–1.5 percent of GDP per year.
  - Reduce dispersion of public debt outcomes, supporting the regional currency board arrangement and regional financial stability.
- Preconditions and governance requirements for RSF success:
  - Strong governance framework ensuring transparency and incentive compatibility.
  - Assessment of fiscal sustainability prospects of members to ensure contributions will be available in downturns.
  - Transparent methodology for assessing cyclical revenue and spending positions, possibly with independent institution support.
  - Accounting mechanism for net-credit appropriation and clear access rules (e.g., whether members can be net-debtors of RSF).
  - Regional initiatives to establish minimum common standards for Fiscal Responsibility Frameworks and fiscal rules at the national level would be valuable.
- Long-run role: RSF could serve as a commitment device for fiscal prudence and cross-country peer monitoring to enforce saving in good times and determine withdrawal eligibility in bad times.

*Source: ECCB data, WEO, and IMF staff calculations.*

### REFERENCES

### REFERENCES

### Cited works
- Acevedo, S. 2014. “Debt, Growth and Natural Disasters: A Caribbean Trilogy" IMF Working Paper 14/125.
- Alichi, A., Shibata I., Tanyeri, K. 2019. “Fiscal Multipliers in Small States.” IMF Working Paper 19/72.
- Borensztein, E., Cavallo, E., and Jeanne, O., 2015. “The Welfare Effects from Macro-Insurance Against Natural Disasters.” NBER working paper series No. 21674.
- Cantelmo, A., Melina, G. and Papageorgiou, C., “Macroeconomic Outcomes in Disaster-Prone Countries. International Monetary Fund working paper series No. 19/217.
- Cavallo, E. A., and Noy, I., 2011. “Natural Disasters and the Economy: A Survey." International Review of Environmental and Resource Economics, 5: 63102.
- Cavallo, E., Galiani,S., Niy, I., and Pantano, J., 2013. “Catastrophic Natural Disasters and Economic Growth." Review of Economics and Statistics, 95(5): 1549{1561.
- Cummins, J.D., and O. Mahul. 2009. Catastrophe risk financing in developing countries: principles for public intervention. World Bank Publications.
- Dos Reis, L. 2004a. “A Fiscal Insurance Proposal for the Eastern Caribbean Currency Union” G24 Secretariat. https://www.g24.org/wp-content/uploads/2016/01/A-Fiscal-Insurance-Proposal.pdf.
- Dos Reis, L. 2005 “A Fiscal Insurance Scheme for Central America” G24 Secretariat.
- Dos Reis, L. 2004b. “A Fiscal Insurance against Exogenous Shocks for the CFA-fran c Zone” G24 Secretariat. https://www.g24.org/wp-content/uploads/2016/01/Fiscal-Insurance-against-Exogenous-Shocks-in-the.pdf
- El-Ashram, A., Gold, J. Xu, X., 2015. “Too Much of a Good Thing? Prudent Management of Inflows under Economic Citizenship Programs.” IMF Working Paper 15/93.
- Hsiang, S., and Jina, A., 2014. “The Causal Effect of Environmental Catastrophe on Long-run Economic Growth: Evidence from 6,700 Cyclones.” NBER working paper series No. 20352.
- Noy, Ilan. 2009. “The Macroeconomic Consequences of Disasters." Journal of Development Economics, 88(2): 221-231.
- Rasmussen, T. N. 2004. “Macroeconomic Implications of Natural Disasters in the Caribbean." IMF Working Paper 04/224.

### Appendix: National Saving Fund Simulations

- Antigua and Barbuda
  - Off-sample Simulated Dynamics of a Investment Fund (In percent of GDP)
  - Fund stock (RHS)
  - Budget saving into the SF
  - Investmentfinancing with SF
  - Off-sample simulation: Government Investment (EC$ million)
  - Increase in public investment with SF, in percent of GDP (RHS)
  - Public investment without SF, EC$ mn
  - Public investment with SF, EC$ mn
  - 95 percent confidence
  - 90 percent confidence
  - 75 percent confidence
  - 50 percent confidence
  - Expected
  - ECCU commitment by 2035
  - Public Debt Dynamics with a Saving and Investment Fund (In percent of GDP)
  - Saving Fund Stock percent of GDP
  - Probability Saving Fund of Depletion
  - Phi= 1.0 1/
  - 1/ Shareof government consumption above trend saved into the Saving Fund.
  - 2/ Share of investment gap below trend financed with the Saving Fund.
  - Average annual saving flow (RHS)
  - Average annual investment flow (RHS)

- Dominica
  - Off-sample Simulated Dynamics of a Investment Fund (In percent of GDP)
  - Fund stock (RHS)
  - Budget saving into the SF
  - Investmentfinancing with SF
  - Off-sample simulation: Government Investment (EC$ million)
  - Increase in public investment with SF, in percent of GDP (RHS)
  - Public investment without SF, EC$ mn
  - Public investment with SF, EC$ mn
  - 95 percent confidence
  - 90 percent confidence
  - 75 percent confidence
  - 50 percent confidence
  - Expected
  - ECCU commitment by 2035
  - Public Debt Dynamics with a Saving and Investment Fund (In percent of GDP)
  - Saving Fund Stock (In percent of GDP)
  - Probability Saving Fund of Depletion
  - Phi= 1.0 1/
  - Sigma= 0.76 2/
  - 1/ Shareof government consumption above trend saved into the Saving Fund.
  - 2/ Share of investment gap below trend financed with the Saving Fund.
  - Average annual saving flow (RHS)
  - Average annual investment flow (RHS)

- Grenada
  - Off-sample Simulated Dynamics of a Investment Fund (In percent of GDP)
  - Fund stock (RHS)
  - Budget saving into the SF
  - Investmentfinancing with SF
  - Off-sample simulation: Government Investment (EC$ million)
  - Increase in public investment with SF, in percent of GDP (RHS)
  - Public investment without SF, EC$ mn
  - Public investment with SF, EC$ mn
  - 95 percent confidence
  - 90 percent confidence
  - 75 percent confidence
  - 50 percent confidence
  - Expected
  - ECCU commitment by 2035
  - Public Debt Dynamics with a Saving and Investment Fund (In percent of GDP)
  - Saving Fund Stock (In percent of GDP)
  - Probability Saving Fund of Depletion
  - Phi= 1.0 1/
  - Sigma= 0.54 2/
  - 1/ Shareof government consumption above trend saved into the Saving Fund.
  - 2/ Share of investment gap below trend financed with the Saving Fund.
  - Average annual saving flow (RHS)
  - Average annual investment flow (RHS)

- St. Kitts and Nevis
  - Off-sample Simulated Dynamics of a Investment Fund (In percent of GDP)
  - Fund stock (RHS)
  - Budget saving into the SF
  - Investmentfinancing with SF
  - Off-sample simulation: Government Investment EC$ million
  - Increase in public investment with SF, in percent of GDP (RHS)
  - Public investment without SF, EC$ mn
  - Public investment with SF, EC$ mn
  - 95 percent confidence
  - 90 percent confidence
  - 75 percent confidence
  - 50 percent confidence
  - Expected
  - ECCU commitment by 2035
  - Public Debt Dynamics with a Saving and Investment Fund (In percent of GDP)
  - Saving Fund Stock percent of GDP
  - Probability Saving Fund of Depletion
  - Phi= 1.0 1/
  - Sigma = 0.26 2/
  - 1/ Shareof government consumption above trend saved into the Saving Fund.
  - 2/ Share of investment gap below trend financed with the Saving Fund.
  - Average annual saving flow (RHS)
  - Average annual investment flow (RHS)

- St. Lucia
  - Off-sample Simulated Dynamics of a Investment Fund (In percent of GDP)
  - Fund stock (RHS)
  - Budget saving into the SF
  - Investmentfinancing with SF
  - Off-sample simulation: Government Investment (EC$ million)
  - Increase in public investment with SF, in percent of GDP (RHS)
  - Public investment without SF, EC$ mn
  - Public investment with SF, EC$ mn
  - 95 percent confidence
  - 90 percent confidence
  - 75 percent confidence
  - 50 percent confidence
  - Expected
  - ECCU commitment by 2035
  - Public Debt Dynamics with a Saving and Investment Fund (In percent of GDP)
  - Saving Fund Stock percent of GDP
  - Probability Saving Fund of Depletion
  - Phi= 1.0 1/
  - Sigma
  = 0.65 2/
  - 1/ Shareof government consumption above trend saved into the Saving Fund.
  - 2/ Share of investment gap below trend financed with the Saving Fund.
  - Average annual saving flow (RHS)
  - Average annual investment flow (RHS)

- St. Vincent and the Grenadines
  - Off-sample Simulated Dynamics of a Investment Fund (In percent of GDP)
  - Fund stock (RHS)
  - Budget saving into the SF
  - Investmentfinancing with SF
  - Off-sample simulation: Government Investment (EC$ million)
  - Increase in public investment with SF, in percent of GDP (RHS)
  - Public investment without SF, EC$ mn
  - Public investment with SF, EC$ mn
  - 95 percent confidence
  - 90 percent confidence
  - 75 percent confidence
  - 50 percent confidence
  - Expected
  - ECCU commitment by 2035
  - Public Debt Dynamics with a Saving and Investment Fund (In percent of GDP)
  - Saving Fund Stock percent of GDP
  - Probability Saving Fund of Depletion
  - Phi= 1.0 1/
  - Sigma
  = 0.24 2/
  - 1/ Shareof government consumption above trend saved into the Saving Fund.
  - 2/ Share of investment gap below trend financed with the Saving Fund.
  - Average annual saving flow (RHS)
  - Average annual investment flow (RHS)

*Content from wpiea2021191-print-pdf - REFERENCES*

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_Source: https://www.imf.org/-/media/files/publications/wp/2021/english/wpiea2021191-print-pdf.pdf_