Publication: How Much Room Does Latin America and the Caribbean Have for Implementing Counter-Cyclical Fiscal Policies?
Date
2009-04
ISSN
Published
2009-04
Author(s)
Calderón, Cesar
Fajnzylber, Pablo
Abstract
Latin America's government debt has
exhibited a clear downward trend since 2003. While this has
been partly due to rapidly increasing commodity prices, more
sustainable fiscal policies have also been a contributing
factor. In effect, in a significant break with the past,
cyclically adjusted government balances have raised (fallen)
in response to increases (reductions) in debt levels.
However, Latin governments have continued to under?save in
good times and therefore fiscal policy has remained
pro-cyclical, thus weakening the ability to protect the poor
and maintain infrastructure investments during bad times.
Financing and institutional constraints to more
counter?cyclical fiscal policies still remain in most
countries. They are lowest in Chile, followed by Brazil and
Colombia, and highest in Ecuador and Venezuela. Looking
forward, long?term sustainability considerations cannot be
ignored as decisions are made regarding the size,
composition and targeting of fiscal stimulus packages.
Citation
“Calderón, Cesar; Fajnzylber, Pablo. 2009. How Much Room Does Latin America and the Caribbean Have for Implementing Counter-Cyclical Fiscal Policies?. Latin America and the Caribbean Region (LCR) Crisis Briefs. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/2fce6e20-1bd8-58f1-98b9-ccbfc8115a1f License: CC BY 3.0 IGO.”