European Parliament Library

Fiscal Policy in Latin America over the Cycle, Alexander Klemm

This paper provides an analysis of the cyclical stance of fiscal policy in Latin America. Its contributions include developing a new measure of the cyclicality of fiscal policy, careful analysis of the statistical significance of results, and accounting for the effect of commodity prices on fiscal balances. The new cyclicality measure takes into account both discretionary policy action and automatic stabilizers, but excludes additional revenues that are due to applying an unchanged average tax rate to nominal GDP in excess of potential. The paper finds that fiscal policy has been procyclical on average in Latin America, but counter or acyclical in advanced economies. Country-specific results are mostly insignificant, except in a few cases where policy is clearly procyclical. For some countries (Brazil, Chile, Colombia, El Salvador, and Mexico), there is evidence of a recent move toward more countercyclical policies
Table Of Contents
Cover; Abstract; Contents; I. Introduction and Main Findings; II. Methodology; A. The output gap; B. The cyclical stance; Tables; 1: Possible definitions of countercyclical policy in a boom; 2: Definitions of counter-cyclical fiscal policy in the literature; C. Commodity and asset price boom and compositional changes; D. Specification; 3: Apparent cyclicality of fiscal policy from overall fiscal balance in the presence of positive commodity price shocks; E. Estimation; III. Data; IV. Findings; A. Panel data results
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (33 p.)
Specific Material Designation
Form Of Item

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