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Institutional Arrangements and Fiscal Performance: The Latin American Experience

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  • Ernesto Stein
  • Ernesto Talvi
  • Alejandro Grisanti

Abstract

This paper explores the links between institutional arrangements and fiscal performance in" Latin America. We consider four measures of fiscal performance, namely expenditures, the size of fiscal deficits and debt, and the response of fiscal policy to business" fluctuations; and two institutional dimensions, namely, electoral systems and budgetary processes. " We find evidence that electoral systems characterized by a large degree of proportionality large district magnitude, tend to have larger governments, larger deficits and a more procyclical" response to the business cycle. We also find that more transparent and hierarchical budgetary" procedures lead to lower deficits and debt. Contrary to the findings of Hallerberg and von Hagen" for European countries, we find no evidence that centralized budgetary arrangements neutralize the" potentially adverse impact on fiscal deficits of a larger degree of proportionality of the electoral" system.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6358.

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Date of creation: Jan 1998
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Publication status: published as Fiscal Institutions and Fiscal Performance. Poterba, James M., and Jurgen von Hagen, eds., Chicago: The University of Chicago Press, 1999,pp. 103-133.
Handle: RePEc:nbr:nberwo:6358

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  1. Hallerberg, Mark & von Hagen, Jürgen, 1997. "Electoral Institutions, Cabinet Negotiations, and Budget Deficits within the European Union," CEPR Discussion Papers 1555, C.E.P.R. Discussion Papers.
  2. Alesina, Alberto & Hausmann, Ricardo & Hommes, Rudolf & Stein, Ernesto, 1999. "Budget institutions and fiscal performance in Latin America," Journal of Development Economics, Elsevier, vol. 59(2), pages 253-273, August.
  3. Barry Eichengreen & Ricardo Hausmann & Jürgen Von Hagen, 1999. "Reforming Budgetary Institutions in Latin America: The Case for a National Fiscal Council," Open Economies Review, Springer, vol. 10(4), pages 415-442, October.
  4. Persson, Torsten & Roland , Gérard & Tabellini, Guido, 1997. "Comparative Politics and Public Finance," Seminar Papers 633, Stockholm University, Institute for International Economic Studies.
  5. Eichengreen, B., 1992. "Should the Maastricht Treaty be Saved?," Princeton Studies in International Economics 74, International Economics Section, Departement of Economics Princeton University,.
  6. Nouriel Roubini & Jeffrey Sachs, 1988. "Political and Economic Determinants of Budget Deficits in the IndustrialDemocracies," NBER Working Papers 2682, National Bureau of Economic Research, Inc.
  7. repec:fth:inadeb:317 is not listed on IDEAS
  8. International Monetary Fund, 1996. "Budget Processes and Commitment to Fiscal Discipline," IMF Working Papers 96/78, International Monetary Fund.
  9. Roubini, Nouriel, 1991. "Economic and political determinants of budget deficits in developing countries," Journal of International Money and Finance, Elsevier, vol. 10(1, Supple), pages S49-S72, March.
  10. repec:fth:coluec:754 is not listed on IDEAS
  11. Mark Hallerberg & Jürgen von Hagen, 1999. "Electoral Institutions, Cabinet Negotiations, and Budget Deficits in the European Union," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 209-232 National Bureau of Economic Research, Inc.
  12. Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
  13. James M. Poterba, 1996. "Do Budget Rules Work?," NBER Working Papers 5550, National Bureau of Economic Research, Inc.
  14. Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 55-93.
  15. Rogowski, Ronald, 1987. "Trade and the variety of democratic institutions," International Organization, Cambridge University Press, vol. 41(02), pages 203-223, March.
  16. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
  17. Eichengreen, Barry & Bayoumi, Tamim, 1994. "The political economy of fiscal restrictions: Implications for Europe from the United States," European Economic Review, Elsevier, vol. 38(3-4), pages 783-791, April.
  18. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
  19. von Hagen, Jurgen, 1991. "A note on the empirical effectiveness of formal fiscal restraints," Journal of Public Economics, Elsevier, vol. 44(2), pages 199-210, March.
  20. Michael Gavin & Roberto Perotti, 1997. "Fiscal Policy in Latin America," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 11-72 National Bureau of Economic Research, Inc.
  21. Edin, P-A. & Ohlsson, H., 1990. "Political Determinants Of Budget Deficits: Coalition Effects Versus Minority Effects," Papers 1990k, Uppsala - Working Paper Series.
  22. Rudolf Hommes, 1996. "Evolution and Rationality of Budget Institutions in Colombia," Research Department Publications 4024, Inter-American Development Bank, Research Department.
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