Is tighter fiscal policy expansionary under fiscal dominance? Hypercrowding out in Latin America
AbstractWe test for hypercrowding out as a signal of market concerns over fiscal dominance in five Latin American countries. Hypercrowding out occurs when fiscally dominated governments’ domestic credit demands are perceived as so intrusive to a nation’s financial system that a move towards fiscal surplus lowers interest rates and increases growth. We sample five Latin American countries to test for these relationships. Judged by the results of vector error correction models, three nations test clearly positive, suggesting market concern despite their recent efforts towards fiscal balance.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Dallas in its series Center for Latin America Working Papers with number 0205.
Date of creation: 2005
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-11-05 (All new papers)
- NEP-MAC-2005-11-05 (Macroeconomics)
- NEP-PBE-2005-11-05 (Public Economics)
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