A Lesson from the South for Fiscal Policy in the US and Other Advanced Countries
AbstractAmerican fiscal policy has been procyclical: Washington wasted the expansion period 2001–2007 by running budget deficits, but by 2011 had come to feel constrained by inherited debt to withdraw fiscal stimulus. Chile has achieved countercyclical fiscal policy – saving in booms and easing in recession – during the same decade that rich countries forgot how to do so. Chile has a rule that targets a structural budget balance. But rules are not credible by themselves. In Europe and the United States, official forecasts are overly optimistic in booms; so revenue is spent rather than saved. Chile avoids such wishful thinking by having independent panels of experts decide what is structural and what is cyclical.
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal Comparative Economic Studies.
Volume (Year): 53 (2011)
Issue (Month): 3 (September)
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Other versions of this item:
- Frankel, Jeffrey A., 2011. "A Lesson from the South for Fiscal Policy in the US and Other Advanced Countries," Working Paper Series rwp11-014, Harvard University, John F. Kennedy School of Government.
- Frankel, Jeffrey A., 2011. "A Lesson From the South for Fiscal Policy in the US and Other Advanced Countries," Scholarly Articles 4726595, Harvard Kennedy School of Government.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
- O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
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