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MACROECONOMIC VOLATILITY AND HOUSEHOLD VULNERABILITY IN THE CARIBBEAN

MACROECONOMIC VOLATILITY AND HOUSEHOLD VULNERABILITY IN THE CARIBBEAN. Comments by Guillermo Perry Chief Economist for LAC, World Bank June 2002. OVERVIEW. EXCELLENT REPORT CLEAR FOCUS FOR FURTHER WORK UNDEREMPHASIZED FINDINGS AND AREAS:

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MACROECONOMIC VOLATILITY AND HOUSEHOLD VULNERABILITY IN THE CARIBBEAN

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  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) • IFI’s: 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 • IFI’S • 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

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