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Institutional Arrangements and Fiscal Performance: The Latin American Experience

In: Fiscal Institutions and Fiscal Performance

Listed author(s):
  • Ernesto Stein
  • Ernesto Talvi
  • Alejandro Grisanti

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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This chapter was published in:
  • James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 8025.
    Handle: RePEc:nbr:nberch:8025
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    1. Stein, Ernesto & Hommes, Rudolf & Hausmann, Ricardo & Alesina, Alberto, 1999. "Budget Institutions and Fiscal Performance in Latin America," Scholarly Articles 4553021, Harvard University Department of Economics.
    2. 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.
    3. repec:idb:wpaper:317 is not listed on IDEAS
    4. Rogowski, Ronald, 1987. "Trade and the variety of democratic institutions," International Organization, Cambridge University Press, vol. 41(02), pages 203-223, March.
    5. von Hagen, Jurgen & Harden, Ian J., 1995. "Budget processes and commitment to fiscal discipline," European Economic Review, Elsevier, vol. 39(3-4), pages 771-779, April.
    6. Rodrik, Dani, 1996. "Why do More Open Economies Have Bigger Governments?," CEPR Discussion Papers 1388, C.E.P.R. Discussion Papers.
    7. Torsten Persson & Gerard Roland & Guido Tabellini, "undated". "Comparative Politics and Public Finance," Working Papers 114, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    8. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
    9. 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.
    10. Mark Hallerberg & Jurgen von Hagen, 1997. "Electoral Institutions, Cabinet Negotiations, and Budget Deficits in the European Union," NBER Working Papers 6341, National Bureau of Economic Research, Inc.
    11. Rudolf Hommes, 1996. "Evolution and Rationality of Budget Institutions in Colombia," Research Department Publications 4024, Inter-American Development Bank, Research Department.
    12. Edin, Per-Anders & Ohlsson, Henry, 1991. "Political determinants of budget deficits: Coalition effects versus minority effects," European Economic Review, Elsevier, vol. 35(8), pages 1597-1603, December.
    13. 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.
    14. 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 49-72, March.
    15. Alberto Alesina & Roberto Perotti, 1995. "Fiscal Expansions and Fiscal Adjustments in OECD Countries," NBER Working Papers 5214, National Bureau of Economic Research, Inc.
    16. Eichengreen, B., 1992. "Should the Maastricht Treaty be Saved?," Princeton Studies in International Economics 74, International Economics Section, Departement of Economics Princeton University,.
    17. 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.
    18. 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.
    19. Weingast, Barry R & Shepsle, Kenneth A & Johnsen, Christopher, 1981. "The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 642-664, August.
    20. 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.
    21. James M. Poterba, 1996. "Do Budget Rules Work?," NBER Working Papers 5550, National Bureau of Economic Research, Inc.
    22. 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.
    23. 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.
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