MACROECONOMIC VOLATILITY AND HOUSEHOLD VULNERABILITY IN THE CARIBBEAN

1
MACROECONOMIC VOLATILITY AND HOUSEHOLD
VULNERABILITY IN THE CARIBBEAN

• Comments by
• Guillermo Perry
• Chief Economist for LAC, World Bank
• June 2002

2
OVERVIEW

• EXCELLENT REPORT
• CLEAR FOCUS FOR FURTHER WORK
• UNDEREMPHASIZED FINDINGS AND AREAS
• OPPORTUNITIES FOR RISK DIVERSIFICATION WITHIN THE
  REGION (CYCLES ARE NOT STRONGLY CORRELATED table
  1.6)
• IDIOSYNCRATIC RISKS (HEALTH FRICTIONAL
  UNEMPLOYMENT)
• MIGRATION AGREEMENTS

3
POLICY ISSUES (Areas to explore)

• MACROECONOMIC SHOCKS AND POLICIES
• TRADE
• FINANCIAL
• MIGRATION
• FISCAL
• NATURAL DISASTERS
• HOUSEHOLDS
• UNEMPLOYMENT AND INCOME
• HEALTH
• NATURAL DISASTERS

4
TRADE AND FINANCE

• TRADE
• DIVERSIFICATION OF SOURCES OF INCOME (SERVICES,
  EPZ)
• DIVERSIFICATION OF MARKETS (TOURISM/REGIONAL)
• FINANCE
• REGIONAL (non correlation of cycles)
• IFIs support risk diversification and insurance

5
MIGRATION

• AGREEMENTS FOR PERMANENT AND TEMPORARY MIGRANTS
  (US/REGIONAL)
• FACILITATING REMMITANCES
• Clarify
• Are remittances counter cyclical?
• Brain drain is not necessarily bad keep the
  effort in education

6
FISCAL

• RULES FOR COUNTERCYCLICAL FISCAL POLICIES
• Regional (EU)
• Domestic (Chile)
• STABILIZATION FUNDS
• Regional (EU)
• Domestic (Chile, Colombia, Ecuador)
• Clarify How pro cyclical is fiscal policy?

7
NATURAL DISASTERS

• CATASTROPHIC INSURANCE AND SELF PROTECTION
• REGIONAL
• IFIS
• EARLY WARNINGS AND PREPAREDNESS

8
UNEMPLOYMENT AND INCOME

• FORMAL SECTOR
• Hybrid of individual accounts and (limited)
  unemployment insurance (subsidies when
  unemployment hits more the poor).
• Health insurance
• INFORMAL SECTOR
• Public works (Trabajar)
• Conditioned transfers (Progressa)

9
HEALTH

• HEALTH INSURANCE (subsidies for AIDS and the
  poor)
• ASSISTANCE NORMAL TIMES, EMERGENCIES