Public Expenditure Policy in Bolivia: Growth and Welfare

Carlos Machicado Salas, Paul Estrada () and Ximena Flores ()
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Paul Estrada: Institute for Advanced Development Studies
Ximena Flores: Institute for Advanced Development Studies

No 04/2010, Development Research Working Paper Series from Institute for Advanced Development Studies

Abstract: It has been widely documented that fiscal policy can promote economic growth, when it is based on an efficient provision of pubic capital. But little work has been done, in Bolivia, in relation to the macroeconomic and sectoral impacts of increasing public investment in infrastructure. This paper develops a Dynamic Stochastic General Equilibrium (DSGE) model for a small open economy with five sectors: Non-tradable or services, importable or manufacturing, hydrocarbons, mining and agriculture. The model is parameterized and solved for the Bolivian economy and several interesting scenarios are simulated by changing government expenditures, taxes, country risk, Total Factor Productivity, effectiveness of public capital and terms of trade. This analysis is relevant for the Bolivian economy, because the government is using fiscal policy as one of its main tool to attack poverty and aims to put public investment as the foremost instruments to promote growth and welfare.

Keywords: Fiscal Policy; Infrastructure; Multisector Growth Model (search for similar items in EconPapers)
JEL-codes: E62 H54 O41 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2010-05
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-mac
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:adv:wpaper:201004

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