Fiscal Policy in Latin America: Countercyclical and Sustainable at Last?

Daude, Christian; Melguizo, Ángel; Neut, Alejandro

doi:10.2139/ssrn.1985188

Cited by 13 publications

(21 citation statements)

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“…3 The structural balance (B*) is given by the difference between the revenue (R*) and expenditures (E*) sterilized by their transitory components. Daude et al (2010) highlight that for some Latin American countriessuch as Argentina, Bolivia, Colombia, Ecuador, Mexico, Peru and Venezuelait is also necessary to distinguish between tax revenue and revenue from non-renewable products (CR*). As a result, the structural balance is defined as:…”

Section: Endnotesmentioning

confidence: 99%

“… The structural balance (B*) is given by the difference between the revenue (R*) and expenditures (E*) sterilized by their transitory components. Daude et al () highlight that for some Latin American countries – such as Argentina, Bolivia, Colombia, Ecuador, Mexico, Peru and Venezuela – it is also necessary to distinguish between tax revenue and revenue from non‐renewable products (CR*). As a result, the structural balance is defined as:

B = R {(][Y^{*} / Y)}^{italicα} + C R {(][p^{*} / p)}^{italicγ} - E {(][Y^{*} / Y)}^{italicβ}

where, Y*/Y is the ratio between potential and actual output, which is measured by applying the Hodrick‐Prescott filter, while α and β are respectively the elasticity of revenue and expenditure to output; p*/p represents the ratio between the expected prices and actual prices, while γ represents the elasticity that is assumed to be equal to 1 as in Vladkova‐Hollar and Zettelmeyer () …”

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confidence: 99%

“…Velasco (1997) and Tornell and Lane (1999) argue that deficit is often provoked by the intensification of disputes among interest groups over common revenue (voracity effect). 1 A number of authors still argue that Latin American governments' behavior was not different during the recent years (Daude et al 2010;Ocampo, 2011) given that the implementation of countercyclical fiscal policies was the exception rather than the rule in the region (Alberola et al 2016;Bello and Jim enez, 2008;Klemm, 2014). Nonetheless, not all the scholars agree with these conclusions and argue that something changed especially in the second half of 2000s (Fern andez-Arias and P erez 2014).…”

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confidence: 99%

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

Martorano

2017

Review Development Economics

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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.

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Section: Endnotesmentioning

confidence: 99%

B = R {(][Y^{*} / Y)}^{italicα} + C R {(][p^{*} / p)}^{italicγ} - E {(][Y^{*} / Y)}^{italicβ}

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

Martorano

2017

Review Development Economics

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“…Movements in commodity prices are important for the welfare of both developing and developed countries (see, among the others, Lu and Neftci, 2008, Frankel, 2008, and Daude et al, 2010. 3 This importance has spawned a considerable academic literature with a primary focus on their time series properties.…”

Section: Related Empirical Literature On Commodity Pricesmentioning

confidence: 99%

Primary commodity prices: Co-movements, common factors and fundamentals

Byrne

Fazio

Fiess

2013

Journal of Development Economics

168

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The behavior of commodities is critical for developing and developed countries alike. This paper contributes to the empirical evidence on the co-movement and determinants of commodity prices. Using nonstationary panel methods, we document a statistically significant degree of co-movement due to a common factor. Within a Factor Augmented VAR approach, real interest rate and uncertainty, as postulated by a simple asset pricing model, are both found to be negatively related to this common factor. This evidence is robust to the inclusion of demand and supply shocks, which both positively impact on the co-movement of commodity prices.

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“…As in Girouard and André (2005), the cyclical sensitivity of the wage base (PIT and SSC tax base) has been estimated using an equation that links directly the cyclical component of the wage bill to the output gap. We regress the share of the real wage bill in potential GDP (constructed with active population from the Penn World tables, and unemployment and urban workers wages from ECLAC) on the output gap (estimated using unobserved components model on real chained GDP series from Penn World tables) and a constant, in logs with annual data from 1981 to 2007 (see Daude et al, 2010 for more details). The estimated responsiveness of the wage bill for Uruguay, Colombia (taken from Lozano and Toro, 2007) and Argentina (around 1.0) are slightly above the OECD average (0.7 according to Girouard and Andre, 2005), and Brazil (0.8 reported by De Mello and Moccero, 2006), while elasticities for the rest are significantly above previous estimates (up to 2.0 in Peru).…”

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confidence: 99%

Fiscal Policy in Latin America: Countercyclical and Sustainable?

2011

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This paper analyses fiscal policy for several economies in Latin America, from the early nineties to the 2009 crisis. We present original estimates of cyclically-adjusted public revenues for Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru and Uruguay implementing the standardised OECD methodology and extending it to include commodity cycles, which have a direct and significant effect on the fiscal balance of several Latin American countries. Based on these estimates, we evaluate the size of automatic tax stabilisers and the cyclicality of discretionary fiscal policy. Additionally, we highlight the uncertainty stemming from the estimation of the output gap, due to large and simultaneous cyclical, temporary and permanent shocks in several Latin American economies. JEL E62, H30, H60

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Fiscal Policy in Latin America: Countercyclical and Sustainable at Last?

Cited by 13 publications

References 21 publications

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

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

Primary commodity prices: Co-movements, common factors and fundamentals

Fiscal Policy in Latin America: Countercyclical and Sustainable?

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