Fiscal policy and the cycle in Latin America: the role of financing conditions and fiscal rules

Enrique Alberola, Iván Kataryniuk, Angel Melguizo and René Orozco
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René Orozco: OECD DEVELOPMENT CENTRE

No 1604, Working Papers from Banco de España

Abstract: Their strong macroeconomic position when the financial crisis erupted allowed Latin American economies to mitigate its impact through fiscal expansions, reversing the characteristic procyclical behaviour of fiscal policy. At the same time, in the last two decades fiscal rules have been extensively adopted in the region. This paper analyses the stabilising role of discretionary fiscal policy over time, and the role of fiscal financing conditions and fiscal rules in the behaviour of a sample of eight Latin American economies. The analysis shows three main results: i) fiscal policies became countercyclical during the crisis, but they have turned procyclical again in recent years; ii) financing conditions are confirmed to be a key driver of the fiscal stance, although their relevance has recently diminished; and iii) fiscal rules are associated with a more marked stabilising role for fiscal policy.

Keywords: procyclical fiscal policy; fiscal rules; financing conditions; Latin America. (search for similar items in EconPapers)
JEL-codes: G12 H3 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2016-02
New Economics Papers: this item is included in nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Related works:
Journal Article: Fiscal Policy and the Cycle in Latin America: the Role of Financing Conditions and Fiscal Rules (2018)
Journal Article: Fiscal Policy and the Cycle in Latin America: the Role of Financing Conditions and Fiscal Rules (2018)
Working Paper: Fiscal policy and the cycle in Latin America: The role of financing conditions and fiscal rules (2017)
Working Paper: Fiscal policy and the cycle in Latin America: the role of financing conditions and fiscal rules (2016)
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