Macroeconomic Fluctuations in the Caribbean: The Role of Climatic and External Shocks
28 Pages Posted: 4 Aug 2009
Date Written: July 2009
This paper develops country-specific VAR models with block exogeneity restrictions to analyze how exogenous factors affect business cycles in the Eastern Caribbean. It finds that external shocks play a key role, explaining more than half of macroeconomic fluctuations in the region. Domestic business cycles are especially vulnerable to changes in climatic conditions, with a natural disaster leading to an immediate and significant fall in output-but the effects do not appear to be persistent. Oil price and external demand shocks also contribute significantly to domestic macroeconomic fluctuations. An increase in oil prices (external demand) is contractionary (expansionary), and the effects dissipate up to three years after the shock.
Keywords: Business cycles, Caribbean, Climatic changes, Cross country analysis, Economic models, External shocks, Regional shocks
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Coping with Disaster: The Impact of Hurricanes on International Financial Flows, 1970-2002
By Dean Yang
Coping with Disaster: The Impact of Hurricanes on International Financial Flows, 1970-2001
By Dean Yang
The Death Toll from Natural Disasters: The Role of Income, Geography and Institutions
Are External Shocks Responsible for the Instability of Output in Low-Income Countries?
Macroeconomic Implications of Natural Disasters in the Caribbean
High Consumption Volatility: The Impact of Natural Disasters?
Hurricanes: Intertemporal Trade and Capital Shocks
Natural Disasters in Latin America and the Caribbean: An Overview of Risk
The Structural Determinants of External Vulnerability
By Norman Loayza and Claudio E. Raddatz
Insuring Public Finances Against Natural Disasters - a Survey of Options and Recent Initiatives
By David Hofman and Patricia Brukoff