Fiscal Policy Throughout The Business Cycle: The Colombian Experience
This paper reviews the close relationship between business cycle and public fi nances in Colombia. The international evidence shows that cyclical move-ments in output systematically affect the balance of public fi nances. Therefore, the assessment of cy-clical and structural components of the budget bal-ance becomes an important tool in the analysis of fi scal policy, because it may allow fi scal authorities to determine the extent to which the fi scal stance in a particular year refl ects their discretionary actions. Our fi ndings indicate that the cyclical component of the central government balance in Colombia has been fairly small in recent times (for about 10% of the overall defi cit). Governments are not usually neutral during the business cycle. Ideally, they ought to practice a countercyclical fi scal policy to moder-ate the magnitude of output fl uctuations. However, in emerging economies, countercyclical fi scal poli-cies are inhibited by domestic and external factors. Using a standard reduced form model closely con-nected to the government budget constraint, we fi nd that fi scal policy in Colombia has been procyclical over the last 45 years or so, with the primary sur-plus falling (and the defi cit rising) as a share of GDP by approximately 1/5th of a percentage point when the output gap increases by one percentage point.
Volume (Year): (2007)
Issue (Month): ()
|Contact details of provider:|| |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Afonso, António, 2005.
"Ricardian fiscal regimes in the European Union,"
Working Paper Series
0558, European Central Bank.
- Carolina Mejía Mantilla & Mauricio Cárdenas & Mauricio Olivera, 2006. "La economía política del proceso presupuestal en Colombia," WORKING PAPERS SERIES. DOCUMENTOS DE TRABAJO 002988, FEDESARROLLO.
When requesting a correction, please mention this item's handle: RePEc:col:000107:004645. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Espe)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.