Fiscal Policy, Stabilization, and Growth: Prudence or Abstinence? (Latin American Development Forum)

Contents......Page 13
Acknowledgments......Page 19
Acronyms and Abbreviations......Page 21
1 Overview: Fiscal Policy, Economic Fluctuations, and Growth......Page 23
PART I: PROCYCLICAL FISCAL POLICY AND VOLATILITY......Page 63
2 Fiscal Discipline, Volatility, and Growth......Page 65
3 The Size and Effectiveness of Automatic Fiscal Stabilizers in Latin America......Page 97
4 Fiscal Federalism and Procyclical Spending: The Cases of Argentina and Brazil......Page 143
5 Fiscal Rules and Procyclicality......Page 181
PART II: FISCAL POLICY AND GROWTH......Page 215
6 Fiscal Discipline, Public Investment, and Growth......Page 217
7 Incentives for Public Investment under Fiscal Rules......Page 247
8 Improving the Stability and Growth Pact Through Proper Accounting of Public Investment......Page 281
9 Accrual Accounting, Long-Term Fiscal Projections, and Public Investment......Page 295
10 Growth and Fiscal Effects of Infrastructure Investment in Brazil......Page 319
Index......Page 341
1.1b Debt and Fiscal Balances in Selected Latin American Countries, 2005......Page 25
1.2 Debt Determinants in Selected Latin American Countries......Page 26
1.3 Latin America: General Government Structural Balance and Primary Expenditure......Page 28
1.4 Latin America: Primary Deficit and Public Infrastructure Investment......Page 29
1.5 Discretionary Fiscal Policy Reaction Function......Page 32
1.6 Response of Automatic Stabilizers to Cyclical Conditions......Page 35
1.7 The Stabilizing Role of Government Size......Page 36
1.8 Latin America: Total Investment in Major Infrastructure Sectors......Page 41
1.9 Sub-Saharan Africa: Overall Deficit and Public Infrastructure Investment......Page 42
1.10 European Union: Primary Deficit and Public Investment......Page 43
1.11 Fiscal Procyclicality and Public Investment Performance......Page 44
2.2 Policy-Induced Volatility and Investment......Page 86
3.1 The Stabilizing Role of Government Size......Page 100
3.2 Cyclical Sensitivity of the Fiscal Position......Page 106
3.3 Automatic Stabilizers’ Response to Cyclical Conditions......Page 108
3.4 Simulation Results: Relative Output Volatilities with Only Ricardian Households......Page 127
3.5 Simulation Results: Tax Structure and Relative Output Volatilities......Page 128
3.6 Automatic Revenue Stabilizers and Business Cycle Volatility......Page 130
3.7 The Stabilizing Role of Government Size in a Broader Sample......Page 132
4.1 Procyclicality of Fiscal Policy......Page 144
4.2 Procyclicality of Fiscal Results......Page 147
4.3 Cross-Plots of Local Output Growth and Fiscal Variables in Argentina......Page 161
4.4 Cross-Plots of Output Growth and Fiscal Variables in Brazil......Page 171
5.1 Volatility of Real GDP Growth......Page 184
5.2 Causes of Latin America’s Excess Volatility over OECD and East Asian Countries, 1975–99......Page 185
5.3 Fiscal Procyclicality and Public Investment......Page 189
5.4 Procyclicality and Asymmetry of Public Investment Responses: Models I and II......Page 193
5.5 Fiscal Procyclicality and Asymmetry of Public Investment Responses: Model III......Page 194
5.6 Real Primary Expenditures during the 1998–2002 Slowdown......Page 195
5.7 Spreads and Business Cycle......Page 197
5.8 Chile: Structural and Actual Balances, 1997–2006......Page 205
5.9 Estimates of Structural Primary and Overall Balance, Latin America......Page 207
5.10 Real Current Expenditures, 1990–2005......Page 208
5.11 Structural and Actual Fiscal Balances in Argentina, 1994–2001......Page 209
6.1 Latin America: Fiscal Adjustment and Public Investment......Page 219
6.2 European Union: Primary Deficit and Public Investment......Page 221
6.3 Fiscal Targets and Public Expenditure Composition......Page 233
9.1 Elements of the Long-Term Fiscal Projection for New Zealand......Page 312
10.1 Ratio of Public Investment to GDP......Page 322
10.2 Public Investments as a Proportion of GDP......Page 323
10.3 Growth Rate of Power-Generating Capacity......Page 324
10.1 Regressions of Stock Change on Investment Flows......Page 325
10.5 GDP, Public Structures, and Public Equipment......Page 326
10.6 Response of per Capita GDP and KPe to a One-Unit Shock to KGs......Page 330
10.7 Simulated Paths of the Debt-to-GDP Ratio......Page 335
1.1 Benefits and Drawbacks of Three Sources of Fiscal Indicators......Page 53
2.1 Summary Statistics for Volatility, Elasticity, and Persistence......Page 73
2.2 What Determines Volatility of Fiscal Policy?......Page 78
2.3 What Determines the Persistence of Government Spending?......Page 79
2.4 Do Institutions Affect Policy Responsiveness?......Page 81
2.5 Output Volatility and Fiscal Policy Characteristics......Page 83
2.6 Growth and Fiscal Policy......Page 85
3.1 Calibrated Parameter Values......Page 121
3.2 Cyclical Properties of the Representative Latin America and the Caribbean and Model Economies......Page 123
3.3 Latin America and the Caribbean: Standard Deviations (Volatilities) Relative to Output......Page 133
3.4 Latin America and the Caribbean: Output Correlations......Page 135
3.5 Latin America and the Caribbean: Persistence of Macroeconomic Aggregates......Page 137
4.1 Procyclicality in the Twentieth Century: Argentina......Page 158
4.2 Cyclical Response of Fiscal Policy: Argentina 1992–2002......Page 159
4.3 Procyclicality of Provincial Resources in Argentina, 1992–2002, Growth Rates......Page 163
4.4 Procyclicality of Provincial Resources in Argentina, 1992–2002, Ratios to GDP......Page 164
4.5 Testing Procyclicality at the Subnational Level......Page 166
4.6 Procyclicality by Province in Argentina, 1992–2002......Page 167
4.7 Sources of Procyclicality......Page 168
4.8 Correlation between Output and Fiscal Variables of Subnational Governments in Brazil......Page 170
5.1 Indicators of Cyclical Sensitivity of Fiscal Aggregates......Page 187
5.3 Public Investment Levels and Procyclicality of Fiscal Policies......Page 190
7.1 Survey of Accounting Practices......Page 258
7.2 Survey of Fiscal Rules in the OECD......Page 262
8.1 Admissible Deficit under the Modified Stability and Growth Pact Rule......Page 289
9.1 Debt-Financed Investment in Cash and Accrual Accounting......Page 301
9.2 Infrastructure Items in the Accrual-Based Financial Statements of the New Zealand Government......Page 302
9.3 Excerpts from GFSM 2001 Accounts for the Central New Zealand Government......Page 304
9.4 Excerpts from the Central Government of El Salvador’s 2003 Balance Sheet, according to GFSM......Page 305
A9.1 Fiscal Information Provided by Three Kinds of Fiscal Reports......Page 315
10.3 Correlation Matrix, Physical Assets......Page 327
10.4 Cointegration Equations, Variables per Worker......Page 328
10.5 Cointegration Equations, Variables per Capita......Page 329
10.6 Net Worth as Proportion of GDP......Page 332