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When Do Governments Improve Fiscal Institutions? Lessons from Financial Crisis and Fiscal Reform in Latin America

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  • Mark Hallerberg
  • Carlos Scartascini

Abstract

Do crises really lead to more institutional reforms? This paper explores the con- nection between financial crises and one type of reform frequently advocated during the recent global financial crisis, namely, fiscal institutional reforms. Some authors expect that crises lead to reforms, but we demonstrate that the relationship is not so straightforward. Using a data set of Latin American countries that experienced several crises and also several periods of reform in the period from 1990 to 2005, we find that the type of crisis and its duration matter. We argue that reforms are less likely during a banking crisis, whereas fiscal crises are most likely to lead to fiscal reforms. This means that the type of economic crisis is important for explaining the likelihood of reforms. We explore other possible explanations for reform, such as the partisanship of the president and whether a country is under an IMF program, and do not find confirming evidence for alternative explanations.

Suggested Citation

  • Mark Hallerberg & Carlos Scartascini, 2015. "When Do Governments Improve Fiscal Institutions? Lessons from Financial Crisis and Fiscal Reform in Latin America," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2015), pages 41-76.
    • Handle: RePEc:col:000425:014006
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    Cited by:

    1. Hallerberg, Mark & Scartascini, Carlos, 2017. "Explaining changes in tax burdens in Latin America: Do politics trump economics?," European Journal of Political Economy, Elsevier, vol. 48(C), pages 162-179.
    2. Mounir Mahmalat & Declan Curran, 2018. "Do Crises Induce Reform? A Critical Review Of Conception, Methodology And Empirical Evidence Of The €˜Crisis Hypothesis’," Journal of Economic Surveys, Wiley Blackwell, vol. 32(3), pages 613-648, July.
    3. Ardanaz, Martín & Hallerberg, Mark & Scartascini, Carlos, 2020. "Fiscal consolidations and electoral outcomes in emerging economies: Does the policy mix matter? Macro and micro level evidence from Latin America," European Journal of Political Economy, Elsevier, vol. 64(C).
    4. Shengquan Wang & Rong Luo, 2024. "Income distribution, financial liberalisations and banking stability: Theory and international evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 2837-2864, July.
    5. Bonvecchi, Alejandro & Calvo, Ernesto & Otálvaro-Ramírez, Susana & Scartascini, Carlos, 2022. "The Effect of a Crisis on Trust and Willingness to Reform: Evidence from Survey Panels in Argentina and Uruguay," IDB Publications (Working Papers) 12359, Inter-American Development Bank.
    6. Levieuge, Grégory & Lucotte, Yannick & Pradines-Jobet, Florian, 2021. "The cost of banking crises: Does the policy framework matter?," Journal of International Money and Finance, Elsevier, vol. 110(C).
    7. Shengquan Wang & Jiawen Luo, 2024. "Understanding the energy sector deregulations: international evidence," Empirical Economics, Springer, vol. 66(4), pages 1511-1551, April.
    8. Lasse Aaskoven, 2018. "Budget institutions and taxation," Public Choice, Springer, vol. 174(3), pages 335-349, March.
    9. Antonio Fatas & Bram Gootjes & Joseph Mawejje, 2025. "Dynamic Effects of Fiscal Rules : Do Initial Conditions Matter ?," Policy Research Working Paper Series 11066, The World Bank.

    More about this item

    Keywords

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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