FISCAL STIMULUS and CONSUMER DEBT Yuliya Demyanyk, Elena Loutskina, and Daniel Murphy*

Total Page:16

File Type:pdf, Size:1020Kb

FISCAL STIMULUS and CONSUMER DEBT Yuliya Demyanyk, Elena Loutskina, and Daniel Murphy* FISCAL STIMULUS AND CONSUMER DEBT Yuliya Demyanyk, Elena Loutskina, and Daniel Murphy* Abstract—In the aftermath of the consumer debt–induced recession, pol- In this paper, we use detailed new data on Department of icymakers have questioned whether fiscal stimulus is effective during pe- Defense (DOD) spending to evaluate whether government riods of high consumer indebtedness. This study empirically investigates this question. Using detailed data on Department of Defense spending for spending during the Great Recession stimulates local eco- the 2007–2009 period, we document that the open-economy relative fiscal nomic growth differently across geographies with varying multiplier is higher in geographies with higher consumer debt. The results levels of prerecession consumer indebtedness. We find that suggest that in the short term (2007–2009), fiscal policy can mitigate the adverse effect of consumer (over)leverage on real economic output dur- consumer debt is an important determinant of the fiscal mul- ing a recession. We then exploit detailed microdata to show that both het- tiplier during the Great Recession. During the 2007–2009 erogeneous marginal propensities to consume and slack-driven economic period, the DOD spending multiplier is higher in geogra- mechanisms contribute to the debt-dependent multiplier. phies with higher prerecession consumer debt-to-income ra- tios than in geographies with lower prerecession consumer debt-to-income ratios.2 We then exploit detailed microdata I. Introduction to evaluate whether aggregate demand and aggregate sup- HE ability of government spending to mitigate recessions ply economic mechanisms contribute to the debt-dependent Thas always been a hotly debated topic among academics, multiplier. practitioners, and policymakers. The 2007 crisis brought new Our analysis is based on DOD spending data that cover pur- arguments to the table as it acutely highlighted the role that chases and obligated funds from $25 to multimillion-dollar consumer indebtedness plays in a recession (Mian & Sufi, contracts since 2000. We observe the start and end dates of 2011). The dramatic rise in U.S. household leverage from the contracts, the primary contractor locations, and the postal about a 1.2 debt-to-income ratio in late 1990 to about 1.65 code in which the majority of the work was performed. Armed in 2006 not only set the stage for the Great Recession but with the granular DOD spending data, we combine the em- also contributed to a decline in aggregate consumption and pirical approaches of Mian and Sufi (2015) and Nakamura ultimately slowed the economic recovery (Mian, Rao, & Sufi, and Steinsson (2014) to implement an instrumental variable 2013; Mian & Sufi, 2015). It is unclear whether fiscal stimulus analysis that evaluates how prerecession consumer debt-to- is effective in this environment. income ratios and the change in DOD spending from 2007 to Consumers’ debt and subsequent deleveraging are fre- 2009 affect economic output over this period. The detailed na- quently invoked to argue that expansionary fiscal pol- ture of this new DOD spending data allows us to conduct the icy might be ineffective during consumer-debt-overhang- analysis at the core-based statistical area (CBSA) level and induced slumps.1 These arguments are bolstered by evidence hence better capture the heterogeneity in consumer leverage. that household deleveraging may be associated with low Moreover, it permits us to focus on the recessionary period spending propensities (Sahm, Shapiro, & Slemrod, 2015; with high total consumer debt and rapid deleveraging by con- Jappelli & Pistaferri, 2014) that should lead to low short-run ducting a purely cross-sectional analysis. fiscal multipliers. At the same time, the proponents of de- Our results suggest that DOD spending multipliers ex- mand stimulus argue that expansionary fiscal policy is more hibit significant heterogeneity across CBSAs with different effective during periods of consumer deleveraging due to high prerecession levels of consumer leverage. The difference in spending propensities (Eggertsson & Krugman, 2012). While the multiplier between the 75th and 25th percentiles of the some theoretical literature sheds light on this debate, few pa- consumer-leverage distribution is about the same as the aver- pers empirically examine this question. age CBSA open-economy fiscal multiplier.3 The results sug- gest that at least in a short to medium run, expansionary fiscal stimulus during a deleveraging recession can mitigate the ad- verse effects of consumer debt overhang on economic growth: Received for publication September 13, 2017. Revision accepted for pub- a 1 percentage point increase in government spending rela- lication June 25, 2018. Editor: Yuriy Gorodnichenko. ∗Demyanyk: University of Illinois at Chicago; Loutskina: University of tive to local income offsets the adverse effects of consumer Virginia, Darden School of Business; Murphy: University of Virginia. indebtedness by about 16%. The views expressed are those of the authors and do not necessarily reflect the official positions of the Federal Reserve Bank of Cleveland or the Federal Reserve System. A supplemental appendix is available online at http://www.mitpress 2Throughout our analysis, we exploit total consumer indebtedness that journals.org/doi/suppl/10.1162/rest_a_00796. accounts for all types of debt balances: mortgages, auto loans, credit card 1In his 2010 speech promoting austerity, U.K. Chancellor of the Exche- debt, and other forms of consumer credit. For simplicity, we refer to it as quer George Osborne asserted, “We have to move away from an economic consumer debt. modelthatwasbasedonunsustainableprivateandpublicdebt....There 3We adopt Nakamura and Steinsson’s (2014) terminology in referring is no choice between going for growth today and dealing with our debts to multipliers estimated from cross-regional variation as “relative open- tomorrow. Indeed we will not have meaningful growth unless we show we economy multipliers.” See Chodorow-Reich (2019) for a discussion of the can deal with our debts” (https://conservative-speeches.sayit.mysociety.org relationship between estimates of open-economy multipliers and fiscal mul- /speech/601526). tipliers derived from national aggregate data. The Review of Economics and Statistics, October 2019, 101(4): 728–741 © 2019 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology https://doi.org/10.1162/rest_a_00796 Downloaded from http://www.mitpressjournals.org/doi/pdf/10.1162/rest_a_00796 by guest on 01 October 2021 FISCAL STIMULUS AND CONSUMER DEBT 729 In the second half of the paper (section IV), we examine with the local consumer debt-to-income ratio, despite con- the validity of two economic mechanisms that could con- sumer leverage having no direct effect on employment in tribute to the debt-dependent multiplier. First, fiscal multipli- this sector. The dependence of this multiplier on prerecession ers might depend on debt-driven heterogeneity in marginal consumer indebtedness suggests that slack dependence may propensities to consume (MPCs). Galí, López-Salido, and also contribute to debt-dependent multipliers during the Great Vallés (2007) and Eggertsson and Krugman (2012) suggest Recession. that consumption of high-debt, credit-constrained house- Overall, our results indicate that the benefits of fiscal holds responds strongly to fiscal stimulus, while consump- stimulus—higher income and employment—are higher in tion of nondebt-constrained agents is relatively unaffected by geographies suffering from consumer debt overhang. While additional income. The resulting higher MPCs among highly we explore only the relative multiplier and do not evaluate levered leveraged consumers should lead to higher fiscal mul- the long-term costs of fiscal stimulus (e.g., public debt and tipliers. In contrast, recent empirical studies document that future tax burdens), our results offer an important implica- high-debt households use additional income to pay down debt tion: the ills of private debt overhang can be mitigated, at rather than to spend (Sahm et al., 2015; Jappelli & Pistaferri, least in the short run, by government spending. Fiscal policy 2014). These studies suggest that deleveraging can be associ- is relatively more effective at stimulating income and em- ated with less effective fiscal policy if debt-ridden households ployment in areas with high consumer debt-to-income ra- are characterized by lower MPCs. tios compared to areas with low consumer debt-to-income We use detailed microdata to evaluate whether govern- ratios. ment spending leads to higher consumption responses for This paper contributes to a number of strands of literature high-debt households. Specifically, we exploit individual- on fiscal policy and consumer behavior. First, we contribute to level measures of consumer debt-to-income ratios along with the debate about the efficacy of fiscal policy during consumer- two measures of household consumption: (a) individual-level debt-overhang-induced slumps. Inspired by the 2007 crisis, consumer credit card balances and (b) postal code–level new an emerging theoretical literature explores optimal policy car registrations.4 We find that consumption of high debt-to- during recessions that feature financial frictions and hetero- income households responds more positively to an increase geneous consumers (Guerrieri & Lorenzoni, 2017; Eggerts- in DOD spending during the crisis period than consump- son & Krugman, 2012). On the empirical side, Bernardini
Recommended publications
  • United Arab Emirates (Uae)
    Library of Congress – Federal Research Division Country Profile: United Arab Emirates, July 2007 COUNTRY PROFILE: UNITED ARAB EMIRATES (UAE) July 2007 COUNTRY اﻟﻌﺮﺑﻴّﺔ اﻟﻤﺘّﺤﺪة (Formal Name: United Arab Emirates (Al Imarat al Arabiyah al Muttahidah Dubai , أﺑﻮ ﻇﺒﻲ (The seven emirates, in order of size, are: Abu Dhabi (Abu Zaby .اﻹﻣﺎرات Al ,ﻋﺠﻤﺎن Ajman , أ مّ اﻟﻘﻴﻮﻳﻦ Umm al Qaywayn , اﻟﺸﺎرﻗﺔ (Sharjah (Ash Shariqah ,دﺑﻲّ (Dubayy) .رأس اﻟﺨﻴﻤﺔ and Ras al Khaymah ,اﻟﻔﺠﻴﺮة Fajayrah Short Form: UAE. اﻣﺮاﺗﻰ .(Term for Citizen(s): Emirati(s أﺑﻮ ﻇﺒﻲ .Capital: Abu Dhabi City Major Cities: Al Ayn, capital of the Eastern Region, and Madinat Zayid, capital of the Western Region, are located in Abu Dhabi Emirate, the largest and most populous emirate. Dubai City is located in Dubai Emirate, the second largest emirate. Sharjah City and Khawr Fakkan are the major cities of the third largest emirate—Sharjah. Independence: The United Kingdom announced in 1968 and reaffirmed in 1971 that it would end its treaty relationships with the seven Trucial Coast states, which had been under British protection since 1892. Following the termination of all existing treaties with Britain, on December 2, 1971, six of the seven sheikhdoms formed the United Arab Emirates (UAE). The seventh sheikhdom, Ras al Khaymah, joined the UAE in 1972. Public holidays: Public holidays other than New Year’s Day and UAE National Day are dependent on the Islamic calendar and vary from year to year. For 2007, the holidays are: New Year’s Day (January 1); Muharram, Islamic New Year (January 20); Mouloud, Birth of Muhammad (March 31); Accession of the Ruler of Abu Dhabi—observed only in Abu Dhabi (August 6); Leilat al Meiraj, Ascension of Muhammad (August 10); first day of Ramadan (September 13); Eid al Fitr, end of Ramadan (October 13); UAE National Day (December 2); Eid al Adha, Feast of the Sacrifice (December 20); and Christmas Day (December 25).
    [Show full text]
  • What the United States Can Learn from the New French Law on Consumer Overindebtedness
    Michigan Journal of International Law Volume 26 Issue 2 2005 La Responsabilisation de L'economie: What the United States Can Learn from the New French Law on Consumer Overindebtedness Jason J. Kilborn Louisiana State University Paul M. Hebert Law Center Follow this and additional works at: https://repository.law.umich.edu/mjil Part of the Bankruptcy Law Commons, Comparative and Foreign Law Commons, Consumer Protection Law Commons, and the Legislation Commons Recommended Citation Jason J. Kilborn, La Responsabilisation de L'economie: What the United States Can Learn from the New French Law on Consumer Overindebtedness, 26 MICH. J. INT'L L. 619 (2005). Available at: https://repository.law.umich.edu/mjil/vol26/iss2/3 This Article is brought to you for free and open access by the Michigan Journal of International Law at University of Michigan Law School Scholarship Repository. It has been accepted for inclusion in Michigan Journal of International Law by an authorized editor of University of Michigan Law School Scholarship Repository. For more information, please contact [email protected]. LA RESPONSABILISATION DE L'ECONOMIE:t WHAT THE UNITED STATES CAN LEARN FROM THE NEW FRENCH LAW ON CONSUMER OVERINDEBTEDNESS Jason J. Kilborn* I. THE DEMOCRATIZATION OF CREDIT IN A CREDITOR-FRIENDLY LEGAL SYSTEM ......................................623 A. Deregulationof Consumer Credit and the Road to O ver-indebtedness............................................................. 624 B. A Legal System Ill-Equipped to Deal with Overburdened Consumers .................................................627 1. Short-Term Payment Deferrals ...................................628 2. Restrictions on Asset Seizure ......................................629 3. Wage Exem ptions .......................................................630 II. THE BIRTH AND GROWTH OF THE FRENCH LAW ON CONSUMER OVER-INDEBTEDNESS ............................................632 A.
    [Show full text]
  • Djibouti Health Expenditure Profile
    Djibouti Health expenditure profile HEALTH SPENDING IN BRIEF WHO PAYS FOR HEALTH? 0.6% Health spending (% of GDP) 3.5 27.8% Health expenditure per capita (US$) 70 Public Out-of-pocket 45.8% Public spending on health per capita (US$) 32 Voluntary prepayment External Other GDP per capita (US$) 2,004 25.8% Life expectancy, both sexes (years) 62 RICHER COUNTRIES SPEND MORE ON HEALTH… …BUT NOT NECESSARILY AS A SHARE OF GDP 10,000 25 20 1,000 15 10 100 Health spending % of GDP 5 Health spending per capita (US$, log scale) 10 0 100 1,000 10,000 100,000 100 1,000 10,000 100,000 GDP per capita (US$, log scale) GDP per capita (US$, log scale) MORE GOVERNMENT SPENDING ON HEALTH IS ASSOCIATED WITH LOWER OUT-OF-POCKET SPENDING DOES GOVERNMENT SPEND ENOUGH ON HEALTH? 100 100 10 80 80 8 60 60 6 % US$ 40 40 4 20 20 2 Out-of-pocket spending % of health 0 0 0 0 2 4 6 8 10 12 14 2006 2008 2010 2012 2014 2016 Public spending on health % of GDP Health spending per capita (US$, bars) Government health spending % of total government spending (line) Djibouti PRIORITY OF HEALTH IN BUDGET ALLOCATION IS A POLITICAL CHOICE 25 20 15 10 5 Government health spending % of total government spending 0 India Egypt Kenya Congo Nigeria Angola Kiribati Ghana Bhutan SudanBoliviaJordan Tunisia Djibouti Vanuatu Armenia Ukraine Zambia Morocco Georgia Eswatini Lao PDRPakistan Myanmar TajikistanMongolia IndonesiaSri LankaViet Nam Honduras Cameroon MauritaniaMicronesia Cambodia Philippines Uzbekistan GuatemalaNicaraguaEl Salvador Timor-LesteBangladesh Côte d'Ivoire Cabo Verde Solomon
    [Show full text]
  • Trends Gross and Net Spending Non-Cash Benefits
    8. PUBLIC EXPENDITURE ON PENSIONS Key Results Public spending on cash old-age pensions and survivors’ benefits in the OECD increased from an average of 6.6% of gross domestic product (GDP) to 8.0% between 2000 and 2015. Public pensions are often the largest single item of social expenditure, accounting for 18.4% of total government spending on average in 2015. Greece spent the largest proportion of national income Trends on public pensions among OECD countries in 2015: 16.9% of Public pension spending was fairly stable as a GDP. Other countries with high gross public pension proportion of GDP over the period 1990-2015 in spending are in continental Europe, with Italy at 16.2% and ten countries: Australia, Germany, Iceland, Israel, Lithuania, Austria, France and Portugal at between 13% and 14% of New Zealand, Poland, Slovenia, Sweden and Switzerland. GDP. Public pensions generally account for between one- fourth and one-third of total public expenditure in these Public pension expenditure increased by more than 4 countries. points of GDP between 2000 and 2015 in Finland, Greece, Portugal and Turkey, and between 2 and 3 percentage points Iceland and Mexico spent 2.1% and 2.2% of GDP on in France, Italy, Japan and Spain. public pensions, respectively. Korea is also a low spender at 2.9% of GDP. Mexico has a relative young population, which Gross and net spending is also the case but to a lesser extent in Iceland, where much of retirement income is provided by compulsory The penultimate column of the table shows public occupational schemes (see the next indicator of “Pension- spending in net terms: after taxes and contributions paid on benefit expenditures: Public and private”), leaving a lesser benefits.
    [Show full text]
  • Mauritius Budget Highlights 2020-2021
    Mauritius Budget Highlights 2020/21 June 4, 2020 KPMG.com/mu Contents 03 KPMG View 08 Budget Financials 10 Economic Outlook Global Business & 14 Regulatory 19 Corporate Tax 23 Personal Tax 26 Indirect Taxes 31 Tax Administration 34 Appendices © 2020 KPMG,KPMG Taxa Mauritian Services partnership Ltd, a Mauritian and a limited member liability firm of company the KPMG and network a member of independent firm of the KPMG member network firms ofaffiliated independent with KPMG memb Inteer firmsrnational affiliated Cooperative, with KPMG a Swiss International entity. All Cooperative, rights reserved.. a Swiss 2 entity. All rights reserved.. Document Classification: KPMG Confidential FOREWORD KPMG View An array of social measures for economic revival The Minister of Finance, Economic Planning and economy, building of a pharmaceutical industry and Development, presented on 4 June 2020 the 2020- promotion of regional partnerships. 2021 budget speech entitled “Our new normal: the The tourism industry received a number of incentives economy of life”. such as the possibility to convert hotels into service The Government has embarked into the post COVID- apartments which can be sold individually, a two year 19 era with measures presented under a “Plan de no-licence fee period for Tourism and Beach Authority Relance de L’Investissement et de L’Economie”, operators, a waiver of rental of State land for one year, “Major Structural Reforms” and “Securing and the increase in the rebate scheme for renovation Sustainable and Inclusive Development”. and restructuring to 100% until 2022. As the country navigates its way out of the COVID-19 Reducing concentration and promoting local pandemic with a projected contraction of 11% this manufacturing year, we also face an ageing population and a high Local manufacturers will benefit with supermarkets gross public sector debt ratio of 83.4% (net 72.7%).
    [Show full text]
  • Bankruptcy Futures: Hedging Against Credit Card Default
    CONSUMER LENDING Bankruptcy Futures: Hedging Against Credit Card Default by Russ Ray his article discusses the new bankruptcy futures contract to be launched by the Chicago Mercantile Exchange and examines the mechanics and contract specifications of this innovation, illus- trating its hedging potential in the process. ometime during the latter half of 1999 or early Credit-card debt is becoming particularly burden- 2000, the Chicago Mercantile Exchange intends some. The average credit-card balance is approximately to launch an innovative new futures contract that $2,500, with typical households having at least three dif- will offer consumer-lending institutions, particularly ferent bank cards. The average card holder also uses six credit-card issuers, a hedge against the bankruptcies additional cards at service stations, department stores, filed by their borrowers. Bankruptcy futures—contracts specialty stores, and other vendors issuing their own cred- to buy or sell a cash-valued index based upon the cur- it cards. rent number of actual bankruptcies—will enable con- Commensurate with such increases in consumer sumer lenders to transfer default risk to other lenders debt is an ever-growing rise in consumer bankruptcies, and/or speculators holding opposite expectations. which, in turn, represent an ever-increasing proportion Significantly, this new contract also constitutes a proxy of total bankruptcies. In 1998, 96.9% of all bankruptcy variable for banks' confidence in the value and liquidity filings were personal—not business—bankruptcies. (In of their own loan portfolios, just as other proxy vari- terms of dollar volume, however, businesses continue to ables now measure consumer and investor confidence.
    [Show full text]
  • The Trans-Pacific Partnership (TPP): Analysis of Economic Studies
    The Trans-Pacific Partnership (TPP): Analysis of Economic Studies James K. Jackson Specialist in International Trade and Finance June 30, 2016 Congressional Research Service 7-5700 www.crs.gov R44551 The Trans-Pacific Partnership (TPP): Analysis of Economic Studies Summary Congress plays a major role in formulating and implementing U.S. trade policy through its legislative and oversight responsibilities. Under the U.S. Constitution, Congress has the authority to regulate foreign commerce, while the President has the authority to conduct foreign relations. In 2015, Congress reauthorized Trade Promotion Authority (TPA) that( 1) sets trade policy objectives for the President to negotiate in trade agreements; (2) requires the President to engage with and keep Congress informed of negotiations; and (3) provides for Congressional consideration of legislation to implement trade agreements on an expedited basis, based on certain criteria. The United States is considering the recently-concluded Trans-Pacific Partnership (TPP) among the United States and 11 other countries. The 12 TPP countries signed the agreement in February 2016, but the agreement must be ratified by each country before it can enter into force. In the United States this requires implementing legislation by Congress. The agreement is viewed by the participants as a “comprehensive and high standard” mega- regional free trade agreement that may hold the promise of greater economic opportunities and closer economic and strategic ties among the negotiating parties. For Members of Congress and others, international trade and trade agreements may offer the prospect of improved national economic welfare. Such agreements, however, have mixed effects on U.S. domestic and foreign interests, both economic and political.
    [Show full text]
  • Consumer Credit Access in France and America Working Paper
    Regulating for Legitimacy: Consumer Credit Access in France and America Gunnar Trumbull Working Paper 11-047 Copyright © 2010 by Gunnar Trumbull Working papers are in draft form. This working paper is distributed for purposes of comment and discussion only. It may not be reproduced without permission of the copyright holder. Copies of working papers are available from the author. Regulating for Legitimacy: Consumer Credit Access in France and America Gunnar Trumbull November 2010 Abstract Theories of legitimate regulation have emphasized the role of governments either in fixing market failures to promote greater efficiency, or in restricting the efficient functioning of markets in order to pursue public welfare goals. In either case, features of markets serve to justify regulatory intervention. I argue that this causal logic must sometimes be reversed. For certain areas of regulation, its function must be understood as making markets legitimate. Based on a comparative historical analysis of consumer lending in the United States and France, I argue that national differences in the regulation of consumer credit had their roots in the historical conditions by which the small loan sector came to be legitimized. Americans have supported a liberal regulation of credit because they have been taught that access to credit is welfare promoting. This perception emerged from an historical coalition between commercial banks and NGOs that promoted credit as the solution to a range of social ills. The French regulate credit tightly because they came to see credit as both economically risky and a source of reduced purchasing power. This attitude has its roots in the early postwar lending environment, in which loans were seen to be beneficial only if they were accompanied by strong government protections.
    [Show full text]
  • Securitization Continues to Grow As a Funding Source for the Economy, with RMBS
    STRUCTURED FINANCE SECTOR IN-DEPTH Structured finance - China 25 March 2019 Securitization continues to grow as a funding source for the economy, with RMBS TABLE OF CONTENTS leading the way Summary 1 China's securitization market Summary continues to grow, providing an increasing share of debt funding for The share of debt funding for the Chinese economy provided by securitization continues the economy 2 to grow, driven in large part by the growing issuance of structured finance deals backed by Securitization market is evolving as consumer debt such as residential mortgages and auto loans. funding needs change, with consumer debt a growing focus 4 » China's securitization market continues to grow, providing an increasing share RMBS and auto ABS issuance of debt funding for the economy. Securitization accounted for 4.6% of total debt growing, but credit card, micro-loan and CLO deals in decline 5 capital market new issuance for the Chinese economy in 2018, up from 3.7% in 2017. Market developments support further At the end of 2018, the total value of outstanding securitization notes stood at RMB2.7 growth 10 trillion, making China the largest securitization market in Asia and the second largest in Moody’s related publications 12 the world behind the US. However, while it continues to grow, securitization still provides a relatively small share of total debt financing for the Chinese economy compared with Contacts what occurs in the US and other more developed markets. Gracie Zhou +86.21.2057.4088 » Securitization market is evolving as funding needs change, with consumer debt a VP-Senior Analyst growing focus.
    [Show full text]
  • Budget Analysis for Investments in Children in Saint Lucia
    Budget Analysis for Investments in Children in Saint Lucia BUDGET ANALYSIS FOR INVESTMENTS IN CHILDREN IN SAINT LUCIA Published by UNICEF Office for the Eastern Caribbean Area First Floor, UN House Marine Gardens, Hastings Christ Church Barbados Tel: (246) 467 6000 Fax: (246) 426 3812 Email: [email protected] Website: www.unicef.org/easterncaribbean This Study was commissioned by the UNICEF Office for the Eastern Caribbean Area and UN Women Multi-Country Office - Caribbean The contents do not necessarily reflect the policies or views of the organizations. Authors: Zina Nimeh, Arthur Van de Meerendonk, Franziska Gassmann, Jouke Wortelboer, Eli Stoykova and Daphne Francoise Nimeh, Z., Van de Meerendonk, A., Gassmann, F., Wortelboer, J. and Stoykova, E., Francoise, D. (2015). Budget Analysis for Investments in Children in Saint Lucia, UNICEF Office for the Eastern Caribbean Area. All rights reserved. 2015 Budget Analysis for Investments in Children in Saint Lucia CONTENTS Acknowledgments x Executive summary 2 1 Introduction 12 1.1 Structure of the report 13 1.2 Government actors 13 1.3 Data and methodology 13 1.4 Limitations 14 1.5 Process 14 2 Economic and Social Context 16 2.1 Economic and fiscal environment 16 2.2 Fiscal operations and management and the social budget 19 2.3 Demographic trends 21 2.4 Labour market 23 2.5 Poverty and child well-being 25 2.6 Conclusion 30 3 Education 32 3.1 Short overview of the education system in Saint. Lucia 32 3.2 Policies and planning 33 3.2.1 Laws and other basic regulations concerning education
    [Show full text]
  • Fiscal and Structural Reforms in Saint Lucia: Towards a Comprehensive
    FISCAL AND STRUCTURAL REFORMS IN SAINT LUCIA: TOWARDS A COMPREHENSIVE AGENDA NOVEMBER 2016 FISCAL AND STRUCTURAL REFORMS IN SAINT LUCIA: TOWARDS A MORE COMPREHENSIVE AGENDA vi Disclaimer Copyright © Caribbean Development Bank (CDB). The opinions, findings, interpretations and conclusions expressed in this publication are those of the staff of CDB and do not necessarily reflect the official policy or position of CDB, its Board of Directors, or the countries they represent. This work may be reproduced, with attribution to CDB, for any non-commercial purpose. The use of CDB's name for any purpose other than for attribution, and the use of CDB's logo shall be subject to a separate written licence agreement between CDB and the user and is not authorized as part of this licence. No derivative work is allowed. CDB does not necessarily own each component of the content contained within this document and therefore does not warrant that the use of any third-party owned individual component or part contained in this work will not infringe on the rights of those third parties. Any risks of claims resulting from such infringement rest solely with the user. CDB does not guarantee the accuracy of the data included in this work. Any dispute related to the use of the works of CDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. Nothing herein shall constitute or be deemed to constitute a waiver of the privileges and immunities of CDB, all of which are specifically reserved. FISCAL AND STRUCTURAL REFORMS IN SAINT LUCIA: TOWARDS A MORE COMPREHENSIVE AGENDA ii Acknowledgements The Caribbean Development Bank expresses appreciation to the Eastern Caribbean Central Bank for its contribution to the Report, as well as to the Staff of the Ministry of Finance, especially the Research and Policy Unit, who provided invaluable assistance on this project.
    [Show full text]
  • A) the Economic Rationale for Trade Net Effect on the Terms-Of-Trade, but Lead to a Agreements Contraction of Trade Volumes Which Reduces Overall Welfare (See Box 1
    II – B FLEXIBILITY IN TRADE AGREEMENTS B FLEXIBILITY IN TRADE AGREEMENTS The aim of this section is to: (a) clarify what Economists have identified several rationales for justifies the inclusion of contingency measures in the existence of trade agreements, such as those trade agreements; (b) provide an account of all embodied in the WTO, and its antecedent, the circumstances when a suspension of commitments General Agreement on Tariffs and Trade (GATT). may make economic sense; and (c) identify the Two main approaches can be distinguished.1 The flexibility measures built into WTO agreements. first states that in the absence of a trade agreement, The section provides a framework for the discussion a country may be tempted to manipulate the of specific contingency measures in the subsequent terms-of-trade (i.e. the price of its exports relative sections of the Report. to its imports) in order to increase its national income at the expense of its trading partners. The 1. ECONOMIC THEORIES OF second approach stresses the economic and political TRADE AGREEMENTS AND THE difficulties that governments face in setting trade policy. As discussed below, trade agreements allow ROLE OF FLEXIBILITIES governments to escape terms-of-trade conflicts and/ or to resist pressures from the private sector and Trade agreements aim to strike a balance between special-interest groups urging the government to flexibility and commitments. If there is too deviate from a liberal trade policy. much flexibility, the value of the commitment is undermined. If there is too little flexibility, countries i) The traditional approach to trade agreements may refuse to make deep commitments or may easily renege on such commitments.
    [Show full text]