Fiscal policy and economic growth: a simulation analysis for Bolivia

Carlos Machicado Salas and Paúl Estrada ()
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Paúl Estrada: Institute for Advanced Development Studies (INESAD), La Paz, Bolivia

Analítika, 2012, vol. 4, issue 2, 57-79

Abstract: This paper develops a dynamic stochastic general equilibrium (DSGE) model to analyze the growth effects of fiscal policy in Bolivia. It is a multi-sector model with five representative sectors for the Bolivian economy: Non-tradables, importables, hydrocarbons, mining and agriculture. Public capital is included as a production factor in each of these sectors. The model is calibrated and a number of interesting scenarios are simulated by modifying each of the available fiscal policy instruments. In particular, we analyze the sustainability of Bolivian social policy based on government transfers to households along with the short- and long-run implications of fiscal policy for growth and welfare. We find that fiscal policy alone is unable to generate high rates of growth: it must be accompanied by an efficient provision of public capital and productivity boosts in the economic sectors.

Keywords: Fiscal Policy; Infrastructure; Multi-sector growth model (search for similar items in EconPapers)
JEL-codes: E62 H54 O41 (search for similar items in EconPapers)
Date: 2012
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