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Fiscal Policy in Latin America: Countercyclical and Sustainable?

31 Pages Posted: 15 Dec 2011  

Christian Daude

Inter-American Development Bank (IADB)

Ángel Melguizo

Organization for Economic Co-Operation and Development (OECD) - Development Centre (DEV)

Alejandro Neut

Massachusetts Institute of Technology (MIT) - Department of Economics

Date Written: 2011

Abstract

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.

Keywords: fiscal policy, business cycle, public finances

JEL Classification: E62, H30, H60

Suggested Citation

Daude, Christian and Melguizo, Ángel and Neut, Alejandro, Fiscal Policy in Latin America: Countercyclical and Sustainable? (2011). Economics: The Open-Access, Open-Assessment E-Journal, Vol. 5, 2011-14. Available at SSRN: https://ssrn.com/abstract=1972785 or http://dx.doi.org/10.5018/economics-ejournal.ja.2011-14

Christian Daude (Contact Author)

Inter-American Development Bank (IADB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Ángel Melguizo

Organization for Economic Co-Operation and Development (OECD) - Development Centre (DEV) ( email )

94, rue Chardon Lagache
Paris, 75775
France

Alejandro Neut

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States

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