Fiscal Policy in Latin America

Gavin, Michael; Perotti, Roberto

doi:10.1086/654320

Cited by 474 publications

(222 citation statements)

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“…Structural arguments: limited access to domestic or external funds may hamper the ability of government to pursue expansionary fiscal policy in bad time (Gavin and Perotti [1997], Riascos and Végh [2003], Caballero and Krishnamurthy [2004]). …”

Section: …)mentioning

confidence: 99%

“…While fiscal policy in industrial countries is either a-cyclical or countercyclical, fiscal policy in developing countries is, mostly, procyclical. Gavin and Perotti [1997] were the first to call attention to the fact that fiscal policy in Latin America appeared to be procyclical. Talvi and Végh [2005] claimed that procyclical fiscal policy seemed to be the rule in the developing world.…”

Section: Introductionmentioning

confidence: 99%

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Why is Fiscal Policy Procyclical in MENA Countries?

Slimane¹,

Tahar²

2010

IJEF

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The optimal fiscal policy is countercyclical, aiming to keep the output close to its potential. Nevertheless, it has been pointed out that developing countries are unable to run countercyclical fiscal policies. Several researchers have attributed these sub optimal fiscal policies to two groups of arguments. (i) The limited access to domestic or external funds may hinder the ability of government to pursue expansionary fiscal policy in bad time.(ii) The second group of factors explains that sub-optimal fiscal policies are associated with institutional theories. The standard argument suggests that countries pursuing poor fiscal policies have, also, weak institutions, widespread corruption, and lack of property rights and repudiation of contract.The main goal of this paper is to analyze empirically if the ability of MENA countries to conduct countercyclical fiscal policy is affected by the quality of their institutions, the nature of political regime and/or by the availability of financial resources either on the local or international capital markets.From our fiscal policy regression, we find that government expenditure in MENA region is procyclical. We conclude that MENA countries are unable to run countercyclical fiscal policies if they have weak institutions, small access to international, domestic credit market, and democratic political regime.

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Section: …)mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Why is Fiscal Policy Procyclical in MENA Countries?

Slimane¹,

Tahar²

2010

IJEF

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“…More specifically, procyclical fiscal policy is at odds with both the neoclassical notion that tax policy should be used to smooth tax distortions and expenditures over the business cycle-provided shocks to the tax base or spending are temporary-and the Keynesian notion that taxes and expenditures should try to dampen, rather than exacerbate, business cycle fluctuations. Gavin and Perotti (1997) were the first authors to document that budget deficits in Latin America in 1970-95 largely failed to respond to economic growth, suggesting that discretionary policy was used in a procyclical fashion, so as to offset automatic stabilizers (for example, raising expenditures to offset revenue windfalls in good times). They suggested that the explanation might relate to the fact that capital flows are also strongly associated with the business cycle: they tend to be high in good times and low (or negative) in bad times.…”

Section: Fiscal Rules and Procyclicalitymentioning

confidence: 99%

“…While Gavin and Perotti (1997) argued that the difference in procyclicality between Latin American and OECD countries was due to the presence of borrowing constraints, successive work has focused on weak institutions, corruption, asymmetric information, "voracity effects,"…”

Section: Fiscal Rules and Procyclicalitymentioning

confidence: 99%

Targeting the Structural Balance

Manasse¹,

Panizza

Reis

2007

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The views and interpretations in this document are those of the authors and should not be attributed to the Inter-American Development Bank, or to any individual acting on its behalf. This paper may be freely reproduced provided credit is given to the Research Department, InterAmerican Development Bank. Terms of use: Documents inThe Research Department (RES) produces a quarterly newsletter, IDEA (Ideas for Development in the Americas), as well as working papers and books on diverse economic issues. To obtain a complete list of RES publications, and read or download them please visit our web site at: http://www.iadb.org/res. 3Abstract * This paper discusses whether a country should conduct fiscal policy by targeting a structural (or cyclically adjusted) fiscal balance. The paper is divided into three sections. The first section discusses the concept of cyclically adjusted balance (CAB) and points out practical and conceptual problems related to the interpretation and the measurement of a CAB. The second section discusses the theoretical rationale for having a fiscal rule in general and a rule defined in terms of a cyclically adjusted balance in particular. The third section discusses conceptual and practical problems with adopting fiscal rules and rules that target the structural balance.

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“…Based on a sample of 104 countries, they point out that developing countries are predominantly procyclical, in contrast with more developed economies which tend to have a fiscal policy that is either countercyclical or acyclical. Gavin and Perotti (1997) had previously contrasted the behaviour of procyclical fiscal policy in Latin America with that of industrialized economies. 3 Similarly, Samuel (2008) has recently found procyclical fiscal policy (particularly of public expenditure) for Caribbean countries.…”

Section: Introductionmentioning

confidence: 99%

Fiscal Cycles in the Caribbean

Araujo

2009

IMF Working Papers

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This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.The sharp increase in debt in the Caribbean since the mid-1990s has focused attention on the conduct of fiscal policy in the region. This paper aims to diagnose how fiscal policy has behaved during this period by looking at three main cycles of the economy: the business, election, and natural disaster cycles. Our main findings suggest that fiscal policy has been mostly procyclical in the region, while disasters have been heavily "insured" by foreign transfers. The "when it rains, it pours" phenomena suggested by Kaminsky, Reinhart and Vegh (2004) seems to take place in the Caribbean. JEL Classification Numbers: F41, E32, E62, Q54

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Fiscal Policy in Latin America

Cited by 474 publications

References 8 publications

Why is Fiscal Policy Procyclical in MENA Countries?

Why is Fiscal Policy Procyclical in MENA Countries?

Targeting the Structural Balance

Fiscal Cycles in the Caribbean

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