When do governments improve fiscal institutions? Lessons from financial crisis and fiscal reform in Latin America

Mark Hallerberg and Carlos Scartascini

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Do crises really lead to more institutional reforms? This paper explores the connection between financial crises and one type of reform frequently advocated during the recent global financial crisis, namely, fiscal institutional reforms. Some authors expect that crises lead to reforms, but we demonstrate that the relationship is not so straightforward. Using a data set of Latin American countries that experienced several crises and also several periods of reform in the period from 1990 to 2005, we find that the type of crisis and its duration matter. We argue that reforms are less likely during a banking crisis, whereas fiscal crises are most likely to lead to fiscal reforms. This means that the type of economic crisis is important for explaining the likelihood of reforms. We explore other possible explanations for reform, such as the partisanship of the president and whether a country is under an IMF program, and do not find confirming evidence for alternative explanations. JEL Classification: D72, H12, H62, H63.

Keywords: fiscal institutions; fiscal reform; debt crisis; banking crisis; political institutions (search for similar items in EconPapers)
JEL-codes: D72 H62 H63 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2015-10-01
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Published in Economía, 1, October, 2015, 16(1), pp. 41 - 76. ISSN: 1529-7470

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Journal Article: When Do Governments Improve Fiscal Institutions? Lessons from Financial Crisis and Fiscal Reform in Latin America (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:123051

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