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

Enrique Alberola-Ila, Iván Kataryniuk (), Angel Melguizo () and René Orozco

No 543, BIS Working Papers from Bank for International Settlements

Abstract: A stronger 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 this evolution in 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, but their relevance has recently diminished; and iii) fiscal rules are associated with a more stabilising role for fiscal policy.

Keywords: procyclical fiscal policy; fiscal rules; financing conditions; Latin America (search for similar items in EconPapers)
Pages: 34 pages
Date: 2016-01
New Economics Papers: this item is included in nep-lam and nep-mac
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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) Downloads
Journal Article: Fiscal Policy and the Cycle in Latin America: the Role of Financing Conditions and Fiscal Rules (2018) Downloads
Working Paper: Fiscal policy and the cycle in Latin America: The role of financing conditions and fiscal rules (2017) Downloads
Working Paper: Fiscal policy and the cycle in Latin America: the role of financing conditions and fiscal rules (2016) Downloads
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