Rethinking Fiscal Rules in the Region

Samuel Alarcón (), Pablo Cachaga () and Martin Vallejos ()
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Samuel Alarcón: ILADES (Chile)
Pablo Cachaga: Banco Central de Bolivia
Martin Vallejos: University Higher School of Economics (Rusia)

Cuadernos de Investigación Económica Boliviana, 2018, vol. 2, issue 2, 1-27

Abstract: In recent years, Latin America has experienced significant fluctuations in its terms of trade. In this context, the countries subject to fiscal rules failed to fully mitigate the impact of adverse external shocks on their economies through the use of fiscal policy. In this sense, using a SVAR, we find that, in face of negative shocks in the terms of trade, the fiscal rules applied by the South American countries do not necessarily guarantee effectiveness of the fiscal policy to stabilize the business cycle fluctuations. Moreover, an expansive fiscal policy for some countries in the region could help reduce volatility of the cycle.

Keywords: Fiscal Policy; Terms of Trade; Business Cycle; Fiscal Rules (search for similar items in EconPapers)
JEL-codes: E32 E62 F41 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:efp:journl:v:2:y:2018:i:2:p:1-27

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