Western Hemisphere

You are looking at 1 - 10 of 100 items for :

  • Type: Journal Issue x
  • National Budget, Deficit, and Debt: General x
Clear All Modify Search
Amr Hosny and Kevin Pallara
This paper argues that the type of COVID-19 containment measures affects the trade-offs between infection cases, economic activity and sovereign risk. Using local projection methods and a year and a half of high-frequency daily data covering 44 advanced and emerging economies, we find that smart (e.g. testing) as opposed to physical (e.g. lockdown) measures appear to be best placed to tackle these trade-offs. Initial conditions also matter whereby containment measures can be less disruptive when public health response time is fast and public debt is low. We also construct a database of daily fiscal announcements for Euro area countries, and find that sovereign risk is improved under a combination of large support packages and smart measures.
Mr. Hamid R Davoodi, Paul Elger, Alexandra Fotiou, Mr. Daniel Garcia-Macia, Xuehui Han, Andresa Lagerborg, Mr. Waikei R Lam, and Mr. Paulo A Medas
Adoption of fiscal rules and fiscal councils continued to increase globally over the last decades based on two new global datasets. During the pandemic, fiscal frameworks were put to test. The widespread use of escape clauses was one of the novelties in this crisis, which helped provide policy room to respond to the health crisis. But the unprecedented fiscal actions have led to large and widespread deviations from deficit and debt limits. The evidence shows that fiscal rules, in general, have been flexible during crises but have not prevented a large and persistent buildup of debt over time. Experience shows that deviations from debt limits are very difficult to reverse. The paper also presents evidence on the benefits of a good track record in abiding by the rules. All these highlight the difficult policy choices ahead and need to further improve rules-based fiscal frameworks.
Mr. Tamim Bayoumi, Mr. Saad N Quayyum, and Sibabrata Das
The paper analyzes the impact of natural disasters on per-capita GDP growth. Using a quantile regressions and growth-at-risk approach, the paper examines the impact of disasters and policy choices on the distribution of growth rather than simply its average. We find that countries that have in place disaster preparedness mechanisms and lower public debt have lower probability of witnessing a significant drop in growth as a consequence of a natural disaster, but our innovative methodology in this paper finds that the two policies are complements since their effectiveness vary across different disaster scenarios. While both are helpful for small to mid-size disasters, lower debt—and hence more fiscal space—is more beneficial in the face of very large disasters. A balanced strategy would thus involve both policies.
Mr. Alejandro D Guerson
This paper quantifies the savings obtained from risk pooling with a Regional Stabilization Fund (RSF) for the Eastern Caribbean Currency Union. A Monte Carlo experiment is used to estimate the size of a RSF conditional on probabilities of depletion under specific saving-withdrawal rules. Results indicate that regional risk pooling requires about half of the saving amount relative to the sum of individual-country savings. In addition to reducing the amount of saving requirements for stabilization, the RSF can improve welfare by realocating government consumption savings during booms towards public investment during recessions, resulting in an increase of public investment in the range of 0.5-1.5 percent of GDP per year depending on the country, with positive growth dividends. Moreover, the RSF also reduces the dispersion of public debt outcomes in light of the cross-country cyclical synchronicity of output and revenue, thereby strengthening the stability of the regional currency board.
Changyong Rhee and Katsiaryna Svirydzenka
The Asia-Pacific region was the first to be hit by the COVID-19 pandemic; it put a strain on its people and economies, and policymaking became exceptionally difficult. This departmental paper contains the assessment of the key challenges facing Asia at this critical juncture and policy advice to the region both to address the current challenges and to build the foundations for a more sustainable and inclusive future. The paper focuses on (1) adjusting to the COVID-19 shock, (2) using unconventional policies when policy space is limited, (3) dealing with debt, and (4) helping the vulnerable and greening the recovery. The paper first presents the different ways countries are adjusting to the COVID-19 shock.