Dominica: Selected Issues
IMF Staff Country Reports, July 20, 2016
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- Dominica: Selected Issues
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Bibliographic details
- Published: July 20, 2016
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498377423.002
Overview
- Presents a proposal for the creation of savings funds (SF) for rehabilitation and reconstruction after natural disasters (ND) in Dominica.
- Concludes that under the parameter calibrations proposed, the SF would be financially sustainable with a low probability of depletion.
Methodology
- Uses a Monte Carlo experiment to calibrate the size of the SF.
- ND fiscal shocks are estimated from an empirical fiscal model.
- ND shocks are identified by:
- Controlling for other major sources of shock affecting the cyclical fluctuations of output, and government revenue and expenditure.
- Calibrating the probability of ND consistent with their historical frequency.
Key Findings
- The Monte Carlo calibration based on the distribution of ND fiscal shocks indicates the SF can be sized to achieve financial sustainability.
- The analysis finds a low probability of SF depletion under the proposed parameter calibrations.
Policy Implications and Recommendations
- Create savings funds (SF) dedicated to rehabilitation and reconstruction after natural disasters (ND).
- Calibrate SF size using:
- Empirical fiscal models to estimate ND fiscal shocks.
- Monte Carlo experiments to account for distributional properties of shocks.
- Probabilities of ND consistent with historical frequency.
- Design SF policy to control for other cyclical sources of shock to output, government revenue, and expenditure when identifying ND-specific shocks.
Content in this bundle
- Dominica: Selected Issues; IMF Country Report No. 16/245; June 21, 2016