The Fiscal Impact of the International Financial Crisis on Latin American and Caribbean Economies

The main objective of this Technical Note is to provide a simple framework to determine the short-term fiscal impact of the international financial crisis on Latin American and Caribbean (LAC) countries, i.e., fiscal financing needs/gap by country (or fiscal liquidity impact). In addition, it will provide a framework to evaluate fiscal sustainability by country (or fiscal solvency impact). In both cases, and depending of the particular country under analysis, transmission mechanisms (variables) will be identified, and sensitivity analysis will be carried out to determine the robustness of their impact. Given that LAC economies are quite heterogeneous, the standard framework will require adjustments to reflect each individual case under analysis. The Note also proposes to start the analysis on those countries with relatively weakest initial conditions as defined by countries with primary and overall fiscal deficits.