Debt Sustainability and Procyclical Fiscal Policies in Latin America
Enrique Alberola () and
Manuel Montero ()
Economía Journal, 2006, vol. Volume 7 Number 1, issue Fall 2006, 157-193
The computation of structural primary balances for the nine main Latin American countries and the comparison of their changes with their cyclical position during the period 1981-2004 confirm that fiscal policy is procyclical in the region. From this evidence, the paper shows strong evidence that the fiscal behavior is closely linked to the financial vulnerability position of the economies and, in particular, to the perception on the sustainability of public debt. The current threshold balance, defined as the primary balance that would render the debt stable under the existing economic and financial conditions, is used as our gauge for measuring debt sustainability concerns at each point in time. The empirical analysis reveals that fiscal stance tightens when the perceptions of debt sustainability worsen, that the impact is stronger the less sustainable debt is perceived, and that when controlling for these effects fiscal policy loses its procyclical stance. The results are robust to different specifications and estimation methods.
Keywords: procyclical fiscal policy; debt sustainability (search for similar items in EconPapers)
JEL-codes: H6 E6 F3 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (17) Track citations by RSS feed
Downloads: (external link)
Working Paper: Debt sustainability and procyclical fical policies in Latin America (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:col:000425:008644
Access Statistics for this article
More articles in Economía Journal from The Latin American and Caribbean Economic Association - LACEA
Bibliographic data for series maintained by LACEA ().