Macroeconomic Fluctuations in the Caribbean : The Role of Climatic and External Shocks

Author/Editor:

Sebastian Sosa ; Paul Cashin

Publication Date:

July 1, 2009

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper develops country-specific VAR models with block exogeneity restrictions to analyze how exogenous factors affect business cycles in the Eastern Caribbean. It finds that external shocks play a key role, explaining more than half of macroeconomic fluctuations in the region. Domestic business cycles are especially vulnerable to changes in climatic conditions, with a natural disaster leading to an immediate and significant fall in output-but the effects do not appear to be persistent. Oil price and external demand shocks also contribute significantly to domestic macroeconomic fluctuations. An increase in oil prices (external demand) is contractionary (expansionary), and the effects dissipate up to three years after the shock.

Series:

Working Paper No. 09/159

Subject:

English

Publication Date:

July 1, 2009

ISBN/ISSN:

9781451873061/1018-5941

Stock No:

WPIEA2009159

Format:

Paper

Pages:

27

Please address any questions about this title to publications@imf.org