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Cover -- CONTENTS -- THE RECOVERY IS UNDERWAY, BUT RISKS ARE LOOMING -- A. Recent Developments -- B. Outlook and Risks -- MACROFINANCIAL POLICY DISCUSSIONS -- A. Robust Frameworks to Support Fiscal Consolidation -- B. Building Ex-Ante Resilience to Natural Disasters -- C. Strategy for Stability and Resolving Problems in the Financial Sector -- D. Competitiveness and Growth -- AUTHORITIES' VIEWS -- STAFF APPRAISAL -- BOXES -- 1. Fitting Fiscal Frameworks to Country Characteristics -- 2. The Benefits of Resilient Investment -- 3. Natural Disaster Insurance Financing -- FIGURES -- 1. Real Sector Developments -- 2. Tourism Developments -- 3. Monetary Developments -- 4. Financial Soundness Indicators -- 5. Credit Developments -- 6. Doing Business Indicators -- TABLES -- 1. Selected Economic and Financial Indicators, 2014-24 -- 2. Selected Economic Indicators by Country, 2014-24 -- 3. Selected Central Government Fiscal Indicators by Country, 2014-24 -- 4. Selected Public Sector Debt Indicators by Country, 2014-24 -- 5. Monetary Survey, 2014-24 -- 6. Summary Balance of Payments, 2014-24 -- 7. Selected Labor Force Indicators -- 8. Financial Structure, end-2017 -- 9. Financial Soundness Indicators of the Banking Sector 2010-2018 -- 10. Selected Financial Soundness Indicators by Country, 2010-2018 -- ANNEXES -- I. Implementation of Previous Staff Advice -- II. Risk Assessment Matrix -- III. External Assessment -- IV. Real and Financial Cycles in the ECCU -- V. Impact of US Shocks on the ECCU -- VI. Competitiveness in Tourism Markets -- VII. United Kingdom Overseas Territories-Anguilla and Montserrat -- CONTENTS -- RELATIONS WITH THE FUND -- CARTAC: CAPACITY BUILDING IN THE ECCU.

Cover -- CONTENTS -- BUILDING EX-ANTE RESILIENCE TO NATURAL DISASTERS -- A. Introduction -- B. Resilient Investment: Model Simulations -- C. Quantifying Insurance Needs: A Layering Framework -- D. Conclusions: Putting it all Together -- References -- APPENDICES -- I. Model Assumptions -- II. Parameter Calibration -- III. Insurance Simulation Methodology -- RESILIENT FISCAL FRAMEWORKS FOR THE ECCU: A ROADMAP -- A. Introduction -- B. Diagnosing ECCU's Fiscal Problems -- C. International Experience with Fiscal Responsibility Frameworks -- D. Designing Resilient Fiscal Frameworks for the ECCU -- E. Concluding Remarks -- References -- BOX -- 1. Options for Escape Clauses for Natural Disasters in the FRFs -- APPENDICES -- I. Tools Used to Evaluate the Fiscal Framework Design -- II Analysis of ECCU-6 Fiscal Performance -- III. Institutional Factors to Underpin the ECCU FRFs.

This paper studies the nature of the shocks affecting the Eastern Caribbean Currency Union (ECCU), and examines whether a hypothetical Eastern Caribbean fiscal insurance mechanism could insure member countries of the union against asymmetric national income shocks. The empirical results suggest that a one dollar reduction in an ECCU member country's per capita personal income could trigger, through reduced income taxes and increased transfers, flows equivalent to about 7 percent of the initial income shock. Each member of the currency union could benefit as well, although the extent of shock m

The objective of this paper is to analyze the growth performance of the ECCU countries since independence and the policy challenges they face to ensure sustained growth in the period ahead. Although tourism specialization may bring about higher growth, it could also increase volatility in growth by amplifying the impact of business cycles in source countries on the tourism sector. Low productivity growth is principally the reason for the slowdown in growth. High debt levels have been a major drag on growth

Throughout the turbulence in the international financial system, eastern Caribbean countries have enjoyed remarkable monetary and economic stability. This paper attempts to characterize the types of structural shocks in the Eastern Caribbean Currency Union (ECCU) and other countries in the region and compare them with other currency unions such as the African Financial Community (CFA) franc zone and the Eurozone. Mundell's criteria on the optimum currency area (OCA) are examined by using a 2-variable structural vector autoregressive (SVAR) model and estimating the extent of symmetric shocks. We find that the role of regional shocks in explaining domestic outputs among the ECCU countries is comparable to that of the EMU countries and much higher than that of the non-ECCU countries in the same region or the CFA franc zone countries. This suggests that the ECCU countries are structurally similar to each other and thus more likely to be subject to symmetric shocks. Their monetary and exchange arrangements appear to have well served the region and the group of countries satisfies most of the criteria to be categorized as an optimum currency area.

There is increasing interest in regional trade, investment, and currency blocs, and in the optimal public policies for such blocs. There is also much managerial interest in the co-movement of exchange rates in a region. The Eastern Caribbean Currency Bloc is one of only three (and one of the longer lasting) multi-country common central banks in the world and is the only such bank in which member countries pool all their foreign reserves. While it is an important economic region especially for the United States, most studies of regional exchange rate relationships have not examined the nature of Caribbean exchange rates. This paper documents for the first time that purchasing power parity holds for each exchange rate and many real exchange rates are cointegrated and move in a bloc in the Eastern Caribbean region over the 1980s and 1990s.

This paper uses three methods to assess movements of real exchange rates in the ECCU over time. First, the purchasing power parity hypothesis is tested and then used to provide a benchmark for equilibrium real exchange rates in the region. Second, a fundamentals-based equilibrium real exchange rate approach is used to explore sources of real exchange rate fluctuations in ECCU countries. And third, a macroeconomic balance approach is used to estimate equilibrium current account or current account ""norms"". The main finding of these analyses is that there is little evidence of overvaluation of