Cyclicality of Fiscal Policy in Latin America over the period 1990 ‐ 2015

Abstract

Latin American countries experienced important changes in the 2000s. The implementation of fiscal reforms, public debt reduction and the high level of accumulated reserves gave them more policy space than in the past. As a result, Latin American countries were able to implement countercyclical policies to face the negative economic and social consequences associated with the recent macroeconomic shock. Some countries performed better than others. In particular, Social Democratic and Centrist governments enjoyed more fiscal space; they had realized larger budget surpluses over the good years and were able to cope with the crisis without impairing their fiscal conditions. Yet, Latin America has experienced a public finance deterioration in the most recent years. While governments are showing an increasing ability on taxation they are still facing some problems on the expenditure side. As a result, fiscal policy returned acyclical after the period of the crisis. The sustainability of public accounts may be strengthened increasing tax pressure on the richest, reducing tax evasion and improving current spending efficiency. However, the increasing political problems are putting many questions about future trends of public finance in the region.

Fiscal policy and economic activity in South Asia

“…A vast empirical literature suggests that developing economies tend to follow procyclical fiscal policy: they increase spending (or curb taxes) in good times and cut spending (or raise taxes) during periods of recession (Gavin & Perotti, 1997; Kaminsky, Reinhart, & Végh, 2004; Ilzetzki, 2011; Martorano, 2018). Ilzetzki and Végh (2008) use various econometric methods to address this issue with quarterly data of 49 countries spanning the period from 1960 to 2006.…”

Ciclicidad, reglas macro-fiscales y sostenibilidad, alternativas para países en vías de desarrollo

“…La literatura y la evidencia empírica han manifestado que la política fiscal en países en desarrollo ha tenido una tendencia histórica procíclica, característica propia de la aplicación de política fiscal correlacionada al desempeño de ciclos políticos en gran medida y, de las estructuras productivas primario-expor-tadoras que hacen dependientes las cuentas fiscales a ingresos provenientes de recursos renovables (commodities) altamente volátiles, esto añadido a un gasto fiscal rígido, ingresos fiscales pre-asignados, dificultad de acceso a mercados de capitales (muchas veces imperfectos), marcos institucionales fiscales débiles y altos niveles de evasión y/o elusión fiscal. (Alberola, Braun, Cordella & Montero, 2006;Alesina, Campante & Tabellini, 2008;Gómez, Jiménez & Podestá, 2010;Mesías & Vásquez, 1999;Martorano, 2018) Frankel, Vegh & Vuletin (2013) analizan la ciclicidad de la política fiscal que difiere entre países por grupos de ingresos. En este sentido, bajo un enfoque de impulso fiscal, los países industrializados muestran una correlación negativa entre los componentes cíclicos del gasto gubernamental real y la parte cíclica del Producto Interno Bruto (PIB) en términos reales, lo que implica que el gasto ha tenido un comportamiento contracíclico, esto difiere completamente a la conducta de una gran cantidad de los países en vías de desarrollo donde la correlación ha tenido un comportamiento positivo (procíclico) (Ilzetzki & Végh, 2008).…”

Socio-economic Inequalities in the Americas—A Mitigating Educational Approach

“…A new development economy is indeed gaining strength (Shank, 2018;Martorano, 2017). Traditional agricultural and handicraft activities are rejuvenating, social enterprises are increasing, notably in Costa Rica and Paraguay, the protection of the ecosystem and renewable energies are expanding, and courses on development economics are offered by major universities.…”