OECD Development Centre Working Papers

1815-1949 (online)
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The OECD Development Centre links OECD members with developing and emerging economies and fosters debate and discussion to seek creative policy solutions to emerging global issues and development challenges. This series of working papers is intended to disseminate the OECD Development Centre’s research findings rapidly among specialists in the field concerned. These papers are generally available in the original English or French, with a summary in the other language.

Fiscal policy and the cycle in Latin America

The role of financing conditions and fiscal rules You or your institution have access to this content

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Enrique Alberola, Iván Kataryniuk, Ángel Melguizo, René Orozco
23 Feb 2017
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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.
fiscal rules, procyclical fiscal policy, financing conditions
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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