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Fiscal sustainability and the cyclically adjusted balance policy: methodology and analysis for Chile

Mauricio G. Villena, Cristóbal Gamboni and Andrés Tomaselli

Revista CEPAL, 2018

Abstract: This paper sets forth a framework for analysing fiscal sustainability in the Chilean economy. It starts by making an ex post calculation of indicators of vulnerability and fiscal sustainability, based on the estimation of a sustainable debt level, with public finances considered in stationary state. It then develops an ad hoc dynamic fiscal sustainability model for Chile’s public finances, which for the first time incorporates the dynamic of the Pension Reserve Fund (FRP) with its accumulation and disbursement rules, together with the cyclically adjusted balance policy. Lastly, the study simulates the path of the budgetary central government’s net debt up to 2025, using the projections made in the 2018 Public Finance Report, under a macroeconomic trend scenario and another adverse scenario, all framed by the cyclically adjusted balance rule.

Keywords: ADMINISTRACION FISCAL; POLITICA FISCAL; HACIENDA PUBLICA; MACROECONOMIA; DEUDA PUBLICA; INDICADORES ECONOMICOS; TENDENCIAS ECONOMICAS; TAX ADMINISTRATION; FISCAL POLICY; PUBLIC FINANCE; MACROECONOMICS; PUBLIC DEBT; ECONOMIC INDICATORS; ECONOMIC TRENDS (search for similar items in EconPapers)
JEL-codes: E62 H6 O23 O11 (search for similar items in EconPapers)
Date: 2018-04
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