{
  "title": "A Possible Approach to Fiscal Rules in Small Islands — Incorporating Natural Disasters and Climate Change",
  "publication": "IMF Working Papers, September 6, 2019",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2019/09/06/a-possible-approach-to-fiscal-rules-in-small-islands-incorporating-natural-disasters-and-48590",
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  "summary": "A big challenge for the economic development of small island countries is dealing with external shocks. The Pacific Islands are vulnerable to natural disasters, climate change, commodity price changes, and uncertain donor grants.",
  "sections": [
    {
      "heading": "Major challenge and scope",
      "content": "- Focus: small island countries facing external shocks (natural disasters, climate change, commodity price changes, uncertain donor grants).\n- Geographic example used: Papua New Guinea.\n- Research objective: analyze how natural disasters affect long-term debt dynamics and propose fiscal policy rules to insulate economies from unexpected shocks."
    },
    {
      "heading": "Theoretical analysis and framework",
      "content": "- The paper theoretically analyzes the impact of natural disasters on debt sustainability.\n- Emphasis on rules-based fiscal frameworks for sustainable and countercyclical macroeconomic policies to build resilience against natural hazards."
    },
    {
      "heading": "Key findings",
      "content": "- Expenditure rules have advantages for small island economies prone to shocks.\n- A recurrent expenditure rule based on non-resource and non-grant revenue is particularly effective.\n- The proposed recurrent expenditure rule is interdependently determined by:\n  - government debt targets,\n  - budget balance targets,\n  - expected disaster shocks.\n- The fiscal policy framework is practically applicable for many developing countries facing increasing frequency and impact of natural disasters and climate change."
    },
    {
      "heading": "Policy recommendations",
      "content": "- Adopt expenditure rules, prioritizing recurrent expenditure rules anchored to non-resource and non-grant revenue.\n- Design fiscal rules that explicitly incorporate expected disaster shocks into debt and budget balance targets.\n- Use rules-based fiscal frameworks to enable sustainable and countercyclical macroeconomic policies and build resilience."
    },
    {
      "heading": "Subjects and keywords (as provided)",
      "content": "- Subject: Climate change, Environment, Expenditure, Fiscal policy, Fiscal rules, Natural disasters, Public debt\n- Keywords: appropriation strategy, budget balance rule, C. expenditure rule, capping expenditure growth, cash-flow constraint, Climate change, expenditure rule, Fiscal rules, government activity, government deficit bias, Natural disasters, Pacific Islands, resource revenue, revenue rule, revenue volatility, stabilization fund, WP\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2019/09/06/a-possible-approach-to-fiscal-rules-in-small-islands-incorporating-natural-disasters-and-48590"
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    "Authors: Ryota Nakatani",
    "Published: September 6, 2019",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513511047.001",
    "Focus: small island countries facing external shocks (natural disasters, climate change, commodity price changes, uncertain donor grants).",
    "Geographic example used: Papua New Guinea.",
    "Research objective: analyze how natural disasters affect long-term debt dynamics and propose fiscal policy rules to insulate economies from unexpected shocks.",
    "The paper theoretically analyzes the impact of natural disasters on debt sustainability.",
    "Emphasis on rules-based fiscal frameworks for sustainable and countercyclical macroeconomic policies to build resilience against natural hazards.",
    "Expenditure rules have advantages for small island economies prone to shocks.",
    "A recurrent expenditure rule based on non-resource and non-grant revenue is particularly effective.",
    "The proposed recurrent expenditure rule is interdependently determined by:",
    "The fiscal policy framework is practically applicable for many developing countries facing increasing frequency and impact of natural disasters and climate change.",
    "Adopt expenditure rules, prioritizing recurrent expenditure rules anchored to non-resource and non-grant revenue.",
    "Design fiscal rules that explicitly incorporate expected disaster shocks into debt and budget balance targets.",
    "Use rules-based fiscal frameworks to enable sustainable and countercyclical macroeconomic policies and build resilience.",
    "Subject: Climate change, Environment, Expenditure, Fiscal policy, Fiscal rules, Natural disasters, Public debt",
    "Keywords: appropriation strategy, budget balance rule, C. expenditure rule, capping expenditure growth, cash-flow constraint, Climate change, expenditure rule, Fiscal rules, government activity, government deficit bias, Natural disasters, Pacific Islands, resource revenue, revenue rule, revenue volatility, stabilization fund, WP",
    "**Working Paper**"
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