Sebastian Acevedo Mejia

Debt, Growth and Natural Disasters A Caribbean Trilogy

This paper seeks to determine the effects that natural disasters have on per capita GDP and on the debt to GDP ratio in the Caribbean. Two types of natural disasters are studied –storms and floods– given their prevalence in the region, while considering the effects of both moderate and severe disasters. I use a vector autoregressive model with exogenous natural disasters shocks, in a panel of 12 Caribbean countries over a period of 40 years. The results show that both storms and floods have a negative effect on growth, and that debt increases with floods but not with storms. However, in a subsample I find that storms significantly increase debt in the short and long run. I also find weak evidence that debt relief contributes to ease the negative effects of storms on debt.

Caribbean Growth in an International Perspective: The Role of Tourism and Size

After earlier success, growth performance in most Caribbean countries has been disappointing since the early 1990s. With slower growth, output has fallen behind that of relevant comparator countries. This paper analyzes the growth experience of the Caribbean countries from a cross country perspective. Three findings stand out. First, the slowdown in growth is explained more by a decline in productivity rather than a lack of investment. Second, tourism has been a significant contributor to higher growth (through both capital accumulation and productivity) and lower output volatility, and in many countries there is scope for further expansion of this sector. Third, the small size and the fact that most of these countries are islands have limited growth. Policies aimed at improving productivity, further development of the tourism sector, and regional integration could pay dividends in terms of higher growth in the region.

Caribbean Energy: Macro-Related Challenges

High energy costs contribute to dampening Caribbean competitiveness and potential growth. This paper overviews power sector challenges and takes stock of national and regional strategies to address them. It presents recommendations to move the energy agenda forward based on analyses of macro-aspects of energy reform. These include: i) quantitative assessment of the impact of energy costs on growth and competitiveness; ii) evaluation of gains from implementing announced renewable energy and energy efficiency targets; and iii) analysis of the impact of energy investments on debt sustainability. The paper argues for a bigger role for the private sector in energy reform and discusses prerequisites for good public-private partnerships.

Flying to Paradise: The Role of Airlift in the Caribbean Tourism Industry

This paper studies the role of airlift supply on the tourism sector in the Caribbean. The paper examines the relative importance of U.S.-Caribbean airlift supply factors such as the number of flights, seats, airlines, and departure cities on U.S. tourist arrivals. The possible endogeneity problem between airlift supply and tourist arrivals is addressed by using a structural panel VAR and individual country VARs. Among the four airlift supply measures, increasing the number of flights is found to be the most effective way to boost tourist arrivals on a sustained basis. As a case study, the possible crowding effect of increasing the number of U.S. flights to Cuba is investigated and, based on past observations, we find no significant impact on flights to other Caribbean countries. The impact of natural disasters on airlift supply and tourist arrivals is also quantified.

Revisiting the Potential Impact to the Rest of the Caribbean from Opening US-Cuba Tourism

The Cuban revolution and the subsequent US embargo on Cuba helped shape the tourism sector in the Caribbean, facilitating the birth and growth of alternative destinations. Therefore, the apprehension of the Caribbean tourism industry towards a change in US travel policy to Cuba is understandable, but likely unwarranted. The history of tourism in the region has shown that it is possible for all destinations to grow despite large changes in market shares. Our estimations show that liberalizing US-Cuba tourism could result in US arrivals to Cuba of between 3 and 5.6 million, most of it coming from new tourists to the region. We also identify the destinations most at risk of changes in US-Cuba relations.

External Devaluations; Are Small States Different?

The paper investigates whether the macroeconomic effects of external devaluations have systematically different effects in small states, which are typically more open and less diversified than larger peers. Through several analytical approaches -- DSGE model, event study, and regression analysis -- it finds that the effects of devaluation on growth and external balances are not significantly different between small and large states, with both groups equally likely to experience expansionary or contractionary outcomes. However, the transmission channels are different: devaluations in small states are more likely to affect demand through expenditure compression, rather than expenditure-switching channels. In particular, consumption tends to fall more sharply in small states due to adverse income effects, thereby reducing import demand. Policy conclusions point to the importance of social safety nets, complementary wage and antiinflation policies, investment-boosting reforms, and attention to potential adverse balance sheet effects to ensure positive outcomes.

Midiendo El Impacto Del Capital Humano En El Crecimiento Económico De Corea Del Sur (Measuring the Impact of Human Capital on Economic Growth in South Korea)

Spanish Abstract: Este artículo busca medir el crecimiento de la productividad multifactorial o productividad de factor total (PFT) en Corea sin tener en cuenta las diferencias en la calidad en el factor trabajo. Por lo tanto, asumiendo que la teoría del crecimiento endógeno de Lucas es correcta, la medida de PFT estará sobreestimada e incluirá el impacto del capital humano en el crecimiento económico. Por ello, regresando el crecimiento de la PFT contra medidas del capital humano se obtendrán estimaciones del impacto del capital humano en el crecimiento económico de Corea. El principal resultado del estudio muestra que entre 1980 y 2004 la economía Coreana creció a una tasa anual del 6.7% y la acumulación de capital humano dio cuanta de 1.3 puntos porcentuales de dicha tasa. English Abstract: This paper attempts to measure total factor productivity (TFP) growth in Korea without taking into account quality differences in the labor factor. Therefore, assuming that Lucas theory of endogenous growth is correct, the TFP measure will be overstated and include the impact of human capital on economic growth. Hence, regressing the TFP growth against measures of human capital will estimate the impact of human capital on the economic growth of Korea. The main result of the study show that between 1980 and 2004 the Korean economy grew at an annual rate of 6.7% and human capital accumulation accounted for 1.3% points of that rate.

Convergencia Y Crecimiento Económico En Colombia 1980-2000 (Convergence and Economic Growth in Colombia 1980-2000)

Spanish Abstract: Este artículo busca dar respuesta a si las entidades territoriales colombianas en las últimas dos décadas del siglo xx son un caso de convergencia de los ingresos per cápita. Adicionalmente, se indaga sobre los determinantes del crecimiento económico departamental en Colombia en este mismo periodo. Los resultados indican que en Colombia se dio un proceso de convergencia en los 80, pero no sucedió lo mismo en los 90. En cuanto a los determinantes del crecimiento económico departamental, se hallaron relaciones importantes entre el capital humano, el grado de apertura al comercio exterior, la estabilidad económica, el nivel de industrialización, y los niveles iniciales de ingreso per cápita de los departamentos, con sus tasas de crecimiento. English Abstract: This paper seeks to answer if the Colombian territorial entities in the past tow decades of the 20 th century are a successful case of per capita income convergence. Additionally, it inquires about Colombia’s states economic growth determinants in the same period. The results indicates that there was a convergence process in Colombia during the 80’s, but not in the 90’s. Referring to the state’s economic growth determinants, there were found important relationships between the human capital, the international trade’s grade, the economic stability, the industrialization’s level and the initial per capita income of each state, with it’s growth rate.