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Fiscal Sustainability and Policy Issues in the Eastern Caribbean Currency Union

Author

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  • Anthony J. Pellechio
  • Saqib Rizavi
  • Phebby Kufa

Abstract

The fiscal position of the Eastern Caribbean Currency Union (ECCU) has deteriorated significantly in recent years, resulting in sharp increases in public debt. The sustainability of public debt is examined using the public sector budget constraint to derive the maximum public-debt-to-GDP ratio that can be sustained based on a country's projected steady-state primary balance, interest rate on public debt, and economic growth rate. In this context, government deficits and debt in several ECCU member countries appear unsustainable, posing a risk to the stability of the currency union. A critical issue facing member countries is to implement fiscal policies consistent with sustainable public finances and debt to underpin the currency union.

Suggested Citation

  • Anthony J. Pellechio & Saqib Rizavi & Phebby Kufa, 2003. "Fiscal Sustainability and Policy Issues in the Eastern Caribbean Currency Union," IMF Working Papers 03/162, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:03/162
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    References listed on IDEAS

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    Cited by:

    1. Pamela Coke Hamilton & Yvonne Tsikata & Emmanuel Pinto Moreira, 2009. "Accelerating Trade and Integration in the Caribbean : Policy Options for Sustained Growth, Job Creation, and Poverty Reduction," World Bank Publications, The World Bank, number 2652.
    2. Rupa Duttagupta & Guillermo Tolosa, 2006. "Fiscal Discipline and Exchange Rate Regimes; Evidence From the Caribbean," IMF Working Papers 06/119, International Monetary Fund.

    More about this item

    Keywords

    Fiscal sustainability; Fiscal policy; Currency Union; public debt; debt ratio; fiscal policies; central bank; Studies of Particular Policy Episodes; National Deficit Surplus;

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