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

Author

Listed:
  • Enrique Alberola
  • Iván Kataryniuk
  • Ángel Melguizo
  • René Orozco
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. Les économies de L’Amérique Latine se caractérisent par l’utilisation des politiques fiscaux procycliques. Face à la crise financière de 2008, la région a mis en place des politiques fiscaux contrecycliques qui ont mis en question cette caractéristique, normalement réserve aux pays développés. Néanmoins, ce progrès, qui voyait la politique fiscal comme une entité de stabilisation économique, pourrait être en train d’être renversé. Dans cet enjeu, les conditions de financement et le règles fiscal (dans une mineur niveau), utilise depuis les années 2000, ont joué un rôle important dans le dernier deux décennies. Ce document a cherché a identifié la évolution de la position fiscal (l’orientation budgétaire) depuis 1990. Également, ce document cherche à déterminer le rôle que le les conditions de financement et le règles fiscal ont joué pour déterminer cette orientation budgétaire. Les résultats montrent que la politique budgétaire était devenue contrecyclique pendant les années des cris mais dans les dernières années ils ont redevenu procyclique. Dans ce document les conditions de financement on était confirmé comme une des principales déterminantes de l’orientation budgétaire mais leur relevance a été dilué dans les dernières années. Finalement, l’article montre que les économies qui ont utilisé un règle fiscal sont associe avec un rôle plus stabilisateur de la politique fiscal.

Suggested Citation

  • Enrique Alberola & Iván Kataryniuk & Ángel Melguizo & René Orozco, 2017. "Fiscal policy and the cycle in Latin America: The role of financing conditions and fiscal rules," OECD Development Centre Working Papers 336, OECD Publishing.
    • Handle: RePEc:oec:devaaa:336-en
    DOI: 10.1787/3c20eec1-en
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    References listed on IDEAS

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    More about this item

    Keywords

    financing conditions; fiscal rules; procyclical fiscal policy;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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