Riding the Storm: Fiscal Sustainability in the Caribbean
IMF Working Papers, January 31, 2020
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- Authors: Serhan Cevik, Vibha Nanda
- Published: January 31, 2020
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513526362.001
Empirical framework and scope
- Panel: 16 Caribbean countries.
- Sample period: 1980–2018.
- Method: Model-based sustainability test for fiscal policy; nonlinear estimations also employed.
Key empirical findings
- The coefficient on lagged government debt is positive and statistically significant, implying that fiscal policy in the Caribbean takes corrective actions to counteract an increase in the debt-to-GDP ratio.
- The quadratic debt parameter is negative in nonlinear estimations, indicating that fiscal policy response is not adequate to ensure sustainability at higher levels of debt.
- The fiscal stance tends to be countercyclical on average during the sample period.
Policy implications and recommendations
- Maintaining prudent fiscal policies is necessary to build fiscal buffers.
- Implementing growth-enhancing structural reforms is necessary to build fiscal buffers.
- Prudent fiscal policy combined with growth-enhancing structural reforms is necessary to ensure debt sustainability with high probability even when negative shocks occur over the long term.
Publication metadata (selected)
- Authors: Serhan Cevik, Vibha Nanda
- Date: January 31, 2020
- Series: Working Paper No. 2020/021
- Pages: 19
- DOI: https://doi.org/10.5089/9781513526362.001
Riding the Storm: Fiscal Sustainability in the Caribbean — Serhan Cevik and Vibha Nanda, January 31, 2020. IMF Working Paper No. 2020/021. DOI: https://doi.org/10.5089/9781513526362.001
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