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Ding Ding, Samira Kalla, Mr. Manuel Rosales Torres, and Abdoul Karim Sidibé

countries. The analysis is based on granular information collected from tax and customs administrations across the region. It is worth noting that, recognizing the high costs of tax incentives, the ECCU member countries agreed under the 2006 Treaty of Basseterre, “to the progressive harmonization of taxation policies and incentive legislation.” Against this background, tax incentives for the tourism and manufacturing sectors are supposedly governed by the Hotels Aid Act and the Fiscal Incentives Act, respectively. 8. In practice, however, tax incentives regimes in the

Ding Ding, Samira Kalla, Mr. Manuel Rosales Torres, and Abdoul Karim Sidibé
The pervasive use of tax incentives is costly for the Caribbean countries, yet the benefits seem limited. Better policy coordination at the regional level is needed to help overcome the collective action problems and generate more revenue to support the much-needed infrastructure investment. Using the region’s Citizenship-by-Investment (CBI) programs as an example, we also show that a price-quantity coordination mechanism can help achieve an efficient outcome with greater CBI incomes for member countries.
International Monetary Fund

rates on a number of agricultural products to the less developed members (mainly the OECS countries) was introduced. Third , the CET includes a list of conditional duty exemptions, mainly to be used for approved purposes. Duties can also be suspended in cases of temporary supply shortages. 233. The external tariff regime in the ECCU countries at end-2001 is summarized in Table 1 . While the simple average tariffs are lower than 15 percent, customs and other charges are significant and there is wide dispersion in the tariffs. The maximum tariffs are also high

International Monetary Fund

nontariff barriers. The ranking of tariffs in Table VII.1 are based on simple average of tariff rates. Table VII.1. Description of the Trade Regimes in the ECCU and Major Competitor Countries Restrictiveness Rating Tariffs 4/ Country (Latest Year) Overall 1/ NTB 2/ Tariff 3/ Max. Min. Simple Average Effective Average 5/ CET Status Nontariff Barriers Other Charges Antigua & Barbuda (2003) 6 2 3 70 0 9.6 19.6 3rd phase State monopoly in 5 key products; licensing requirements 10

International Monetary Fund

authorities have taken a number of measures to strengthen the supervisory regime in the ECCU. The principal measures that have been taken include: Drafted a new domestic Banking Act that will address a number of the recommendations made in this report. Some ECCU governments have already commenced parliamentary procedures for its enactment. Regulations and guidelines have been drafted, including for risk-based capital, corporate governance, and loan valuation and provisioning. The draft regulations do not risk-weight ECCU government obligations and do not require

Carlo Pizzinelli, Kotaro Ishi, and Tariq Khan
To complement the early warning signals literature, we study the determinants of banking and currency crises for small states and currency boards. Building on the crisis dataset by Laeven and Valencia (2020), we estimate a binominal logit model to identify the determinants of crises, and as a case study, we apply our models to the Eastern Caribbean Currency Union (ECCU). Our findings largely confirm past studies’ results that both external and domestic fundamentals matter in predicting crisis likelihood, but we find that small states and fixed exchange rate regimes are more sensitive to these fundamentals, compared to larger economies. Our empirical results also suggest that for currency board economies, keeping a high level of the foreign reserve cover—the “backing ratio” defined as official foreign reserves as a share of central bank demand liabilities—is critical to reduce the likelihood of both banking and currency crises. The backing ratio is particularly important during years of global economic downturn.
Carlo Pizzinelli, Kotaro Ishi, and Tariq Khan

of low world real GDP growth. In other words, the degree to which a currency maybe supported by foreign reserves is more relevant to economic stability during global downturns. With the qualifications that our analysis focused on prediction rather than causality, the results provide some policy recommendations for the ECCU. The global pandemic crisis has tested the stability of the currency board regime in the ECCU. In line with historical averages, most macroeconomic indicators on fundamentals in the ECCU pointed to low probabilities of crises, prior to the

International Monetary Fund
This Financial System Stability Assessment on the Eastern Caribbean Currency Union (ECCU) reviews overall stability assessment. The fiscal position of the governments in the region has deteriorated sharply in recent years. A source of strength of the ECCU has been the large historical presence of strong foreign banks. However, the structure of the banking industry is changing with the entry of more aggressive regional banks, and the share of privately owned banks has increased. The limited activity of the organized ECCU securities markets reflects the small number of securities available for trading.
International Monetary Fund
This Selected Issues paper analyzes the competitive threats to the tourism sector in the Eastern Caribbean Currency Union (ECCU). The paper concludes that the ECCU countries have lost competitiveness globally and vis-à-vis newly emergent Caribbean tourist destinations as a result of both price and nonprice factors. The short-term measures implemented by the countries seem to have been insufficient to prevent further declines in 2002. The paper also describes strengthening fiscal discipline through fiscal benchmarks.