| Foreword |
| Preface |
| Abbreviations and Acronyms |
| I. |
Introduction and Overview |
|
Markus Rodlauer and Alfred Schipke |
|
Background |
|
Recent Developments |
|
Overview |
|
| II. |
Macroeconomic Implications of CAFTA-DR |
|
M. Ayhan Kose, Alessandro Rebucci, and Alfred Schipke |
|
Implications for Trade and Investment Flows |
|
Implications for Economic Growth and Welfare |
|
Could CAFTA-DR Help Reduce Poverty in the Region? |
|
CAFTA-DR's Potential Impact on Macroeconomic Volatility and the Co-movement of Business Cycles |
|
Conclusions |
|
Appendix I. The Model |
|
Appendix II. Volatility and Co-Movement of Macroeconomic Variables |
|
References |
| |
| III. |
Trade Liberalization and Tax Coordination |
|
Chiara Bronchi and Dale Chua |
|
Structure and Trend of Tax Revenues in Central America |
|
Estimating the Loss of Tax Revenue from CAFTA-DR |
|
Dealing with the Revenue Impact of CAFTA-DR |
|
CAFTA-DR and Issues of Tax Coordination |
|
Conclusions |
|
Appendix. Data and Methodology for the Calculation of Revenue Losses |
|
References |
| |
| IV. |
Fiscal Sustainability: A Value-at-Risk Approach |
|
Ricardo Adrogué |
|
Analytical Issues and the Traditional Sustainability Approach |
|
Modeling the Debt-to-GDP Ratio Using VaR |
|
Assessment of Policy Options |
|
Conclusions |
|
Appendix. Value-at-Risk Methodology |
|
References |
|
| V. |
Regional Integration and Exchange Rate Arrangements |
|
Jun Il Kim and Laura Papi |
|
Issues Concerning Exchange Rate Regi mes in Developing Countries |
|
Long-Run Options for Exchange Rate Regi mes in Central America |
|
Choosing Among the Long-Run Options: Key Factors |
|
Choosing Among the Long-Run Options: An Index Approach |
|
Conclusions |
|
Appendix. Technical Appendix |
|
References |
|
| VI. |
Regional Integration and Financial Systems Issues |
|
R. Armando Morales and Alfred Schipke |
|
Financial Sector Development and Structure |
|
Challenges for Financial Regulation and Monitoring |
|
Recent Progress Made and Looking Forward |
|
Conclusions |
|
| VII. |
Regional Issues in Macroeconomic Statistics |
|
Lorraine Ocampos |
|
Data Suitability for Analytical Purposes |
|
Moving Toward a Harmonized Statistical Framework |
|
Technical Assistance to the Region |
|
Conclusions |
|
Appendix. Statistical Issues, Suitability of Data for Analytical Purposes, and Technical Assistance Missions |
|
| VIII. |
The Political Economy of Imple menting Pro-Growth and Anti-Poverty Policy Strategies in Central America |
|
Luis Breuer and Arturo Cruz |
|
Setting |
|
Political Support for Pro-Growth and Anti-Poverty Strategies |
|
Generating Consensus on a Long-Term Reform Strategy |
|
Implications for the IMF |
|
References |
|
| Boxes |
| 1.1 |
Regional Economic Institutions |
| 3.1 |
Revenue Effects of Growth Enhancement from CAFTA-DR |
| 3.2 |
Current Status of Customs Administration in Central America |
| 5.1 |
The History of Exchange Rate Regimes in Central America |
| 5.2 |
Regression Results |
| 5.3 |
Projections for Indices of Central A merican Countries |
| 5.4 |
Consolidated Claims of BIS Reporting Bank on Central American Countries |
| 6.1 |
Institutions Conducting Cross-Border Financial Transactions in Central America |
| 6.2 |
Panama's Financial System and Regional Offshore Center |
| 6.3 |
Dominican Republic: Banking Crisis and Financial Reform |
| 7.1 |
Main Data Issues in Central America |
| 7.2 |
Dominican Republic: Data Issues |
| 8.1 |
Institutional Aspects of Strategies to Boost Growth and Reduce Poverty |
| 8.2 |
Consolidated Supervision of the Financial Sector |
|
| Tables |
| 2.1 |
Tariffs in Central America, 1980–99 |
| 2.2 |
Selected Economic Indicators: Central A merica and Mexico, 2004 |
| 2.3 |
Growth of Exports and Imports |
| 2.4 |
Top Eight U.S. Merchandise Imports from Central America, 2003 |
| 2.5 |
Top Eight U.S. Merchandise Exports to Central America, 2003 |
| 2.6 |
Diversification of Exports |
| 2.7 |
Gross Foreign Domestic Investment Flows |
| 2.8 |
Foreign Domestic Investment Inflows from the United States |
| 2.9 |
Dynamics of Economic Growth |
| 2.10 |
Contributions to GDP Growth |
| 2.11 |
Potential Welfare Gains from International Risk Sharing |
| 2.12 |
Forecast Variance Decomposition of GDP Growth |
| 2.13 |
Forecast Variables Decomposition of GDP Growth (Regional Shocks) |
| 2.A1 |
Volatility of Macroeconomic Aggregates |
| 2.A2 |
Co-Movement of Macroeconomic Aggregates with U.S. Aggregates |
| 3.1 |
Consolidated Central Government: Tax Structure for Selected Central American Countries, 2000–03 |
| 3.2 |
Central America: Average Collected Import Duty Rates |
| 3.3 |
Customs Revenue on Imports from the United States, 2003 |
| 3.4 |
Schedule A Imports, 2003 |
| 3.5 |
Revenue Impact of CAFTA-DR, First Year |
| 3.6 |
Honduras and Nicaragua: Revenue Impact of CAFTA-DR, First Year |
| 3.7 |
Summary Table: Revenue Loss of CAFTA-DR |
| 3.8 |
VAT Productivities |
| 3.9 |
Excise Tax Summary |
| 4.1 |
Results from Traditional Debt Sustainability Analysis |
| 4.2 |
Main Vulnerability Measures |
| 4.3 |
Projected Change in Primary Balance |
| 4.4 |
Relative Contribution by Risk Factor |
| 4.5 |
Effect of Increased Reliance on Domestic Currency Debt |
| 5.1 |
Exchange Rate Regimes |
| 5.2 |
Exchange Rate Regimes, Natural Classification |
| 5.3 |
Trade Structure and Openness |
| 5.4 |
Consolidated Claims of BIS Reporting Banks on Central American Countries |
| 5.A1 |
Co-Movements in Output |
| 5.A2 |
Source of Output Co-Movements |
| 5.A3 |
Terms of Trade |
| 5.A4 |
Co-Movements in the Terms of Trade |
| 5.A5 |
Correlations of Terms of Trade |
| 5.A6 |
Inflation Performance |
| 5.A7 |
Co-Movements in Prices |
| 5.A8 |
Optimum Currency Area Index: Regression Results |
| 5.A9 |
Optimum Currency Area Indices for Central America and
Europe vis-à-vis Anchor Country |
| 5.A10 |
Central America: Projections for the Optimum Currency Area
Indices vis-à-vis the United States |
| 6.1 |
Central America: Structure and Performance of the Financial Sector, 1996–2003 |
| 6.2 |
Regional Banks, 2003 |
| 6.3 |
Prudential Requirements |
| 6.4 |
Financial Sector Assessment Program |
| 7.A1 |
Statistical Issues |
| 7.A2 |
Suitability of Data for Analytical Purposes |
| 7.A3 |
Statistics Technical Assistance Missions,
1995–end-January 2005 |
| 8.1 |
Comparative Social Indicators |
| 8.2 |
Comparative Governance Indicators |
|
| Figures |
| 1.1 |
Central America: Real GDP Per Capita Growth |
| 1.2 |
Poverty and Extre me Poverty in Central America |
| 2.1 |
Trade Openness |
| 2.2 |
Trade with the United States |
| 2.3 |
Exports to the United States |
| 2.4 |
Imports from the United States |
| 2.5 |
Growth Rate and Volatility of Macroeconomic Aggregates in Mexico and Central America |
| 2.6 |
Impulse Responses of GDP |
| 2.7 |
Co-movement of Economic Variables in Mexico and the United States |
| 2.8 |
Co-movement of Economic Variables in CAFTA-DR Countries and the United States (Average Correlation) |
| 2.9 |
Impulse Responses |
| 2.A1 |
Production Structure of the CAFTA-DR Model |
| 3.1 |
Tax Revenue, 1990–2003 |
| 3.2 |
Central America: Composition of Tax Revenue, 1990–2003 n percent of GDP) |
| 3.3 |
Composition of Tax Revenue, 1990–2003 (In percent of tax revenue) |
| 3.4 |
Estimated Minimum VAT Rate to Compensate for Tariff Loss, 2003 |
| 4.1 |
Distribution of the Public Ratio of Debt to GDP in 2008 |
| 5.1 |
Nominal Exchange Rate Variability, 1984–2003 |
| 5.2 |
Optimum Currency Area Indices, 1984–2003 |
| 5.3 |
Comparison of OCA Indices vis-à-vis the United States,
1994–2003 |
| 5.4 |
Central America and Europe: Optimum Currency Area Indices |
| 6.1 |
Central America: Public Debt, 1990–2003 |
| 6.2 |
Central America: Financial Sector Development |
| 6.3 |
Banking Sector Dollarization, 2003 |
| 6.4 |
Organizational Structure of Cuscatlán |
