Procyclicality of fiscal policy in emerging countries: the cycle is the trend

Economic research on fiscal policy has shown that while developed economies tend to run countercyclical fiscal policies Latin American countries have been characterized by procyclical policies. One of the explanations given to this phenomenon is that high external debt causes severe constraints on t...

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Autores principales:	Strawczynski, Michel, Zeira, Joseph
Formato:	Artículo
Lenguaje:	eng
Publicado:	Banco Central de Chile 2019
Materias:	POLÍTICA FISCAL CICLOS ECONÓMICOS DEUDA EXTERNA
Acceso en línea:	https://hdl.handle.net/20.500.12580/3792
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spelling	oai-20.500.12580-37922021-04-24T11:06:54Z Procyclicality of fiscal policy in emerging countries: the cycle is the trend Strawczynski, Michel Zeira, Joseph POLÍTICA FISCAL CICLOS ECONÓMICOS DEUDA EXTERNA Economic research on fiscal policy has shown that while developed economies tend to run countercyclical fiscal policies Latin American countries have been characterized by procyclical policies. One of the explanations given to this phenomenon is that high external debt causes severe constraints on the ability to secure new loans which forces countries to cut their budget deficits. Another explanation is related to optimal behavior under political constraints (Talvi and Végh 2005). In this paper we test a different channel related to the characteristics of business cycles. Aguiar and Gopinath (2007) find that in developing countries the cycle is the trend—that is business cycles tend to become persistent and thus to determine the fundamentals of economic performance in these countries. One possible channel is fiscal policy: in times of recession the erratic character of the crisis forces developing economies to cut expenditures while the opposite occurs during booms. This procyclical behavior may characterize other sectors of the economy far beyond the fiscal policy reaction (Kaminsky Reinhart and Végh 2005). 2019-11-01T00:05:53Z 2019-11-01T00:05:53Z 2013 Artículo 978-956-7421-37-4 https://hdl.handle.net/20.500.12580/3792 eng Series on Central Banking Analysis and Economic Policies no. 17 Attribution-NonCommercial-NoDerivs 3.0 Chile http://creativecommons.org/licenses/by-nc-nd/3.0/cl/ .pdf Sección o Parte de un Documento p. 427-466 application/pdf PAÍSES EN DESARROLLO Banco Central de Chile
institution	Banco Central
collection	Banco Central
language	eng
topic	POLÍTICA FISCAL CICLOS ECONÓMICOS DEUDA EXTERNA
spellingShingle	POLÍTICA FISCAL CICLOS ECONÓMICOS DEUDA EXTERNA Strawczynski, Michel Zeira, Joseph Procyclicality of fiscal policy in emerging countries: the cycle is the trend
description	Economic research on fiscal policy has shown that while developed economies tend to run countercyclical fiscal policies Latin American countries have been characterized by procyclical policies. One of the explanations given to this phenomenon is that high external debt causes severe constraints on the ability to secure new loans which forces countries to cut their budget deficits. Another explanation is related to optimal behavior under political constraints (Talvi and Végh 2005). In this paper we test a different channel related to the characteristics of business cycles. Aguiar and Gopinath (2007) find that in developing countries the cycle is the trend—that is business cycles tend to become persistent and thus to determine the fundamentals of economic performance in these countries. One possible channel is fiscal policy: in times of recession the erratic character of the crisis forces developing economies to cut expenditures while the opposite occurs during booms. This procyclical behavior may characterize other sectors of the economy far beyond the fiscal policy reaction (Kaminsky Reinhart and Végh 2005).
format	Artículo
author	Strawczynski, Michel Zeira, Joseph
author_facet	Strawczynski, Michel Zeira, Joseph
author_sort	Strawczynski, Michel
title	Procyclicality of fiscal policy in emerging countries: the cycle is the trend
title_short	Procyclicality of fiscal policy in emerging countries: the cycle is the trend
title_full	Procyclicality of fiscal policy in emerging countries: the cycle is the trend
title_fullStr	Procyclicality of fiscal policy in emerging countries: the cycle is the trend
title_full_unstemmed	Procyclicality of fiscal policy in emerging countries: the cycle is the trend
title_sort	procyclicality of fiscal policy in emerging countries: the cycle is the trend
publisher	Banco Central de Chile
publishDate	2019
url	https://hdl.handle.net/20.500.12580/3792
work_keys_str_mv	AT strawczynskimichel procyclicalityoffiscalpolicyinemergingcountriesthecycleisthetrend AT zeirajoseph procyclicalityoffiscalpolicyinemergingcountriesthecycleisthetrend
_version_	1718346792667447296

Procyclicality of fiscal policy in emerging countries: the cycle is the trend

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