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Public Expenditure Policy in Bolivia: Growth and Welfare

Author

Listed:
  • Carlos Gustavo Machicado

    (Institute for Advanced Development Studies)

  • Paul Estrada

    (Institute for Advanced Development Studies)

  • Ximena Flores

    (Institute for Advanced Development Studies)

Abstract

It has been widely documented that fiscal policy can promote economic growth, when it is based on an efficient provision of pubic capital. But little work has been done, in Bolivia, in relation to the macroeconomic and sectoral impacts of increasing public investment in infrastructure. This paper develops a Dynamic Stochastic General Equilibrium (DSGE) model for a small open economy with five sectors: Non-tradable or services, importable or manufacturing, hydrocarbons, mining and agriculture. The model is parameterized and solved for the Bolivian economy and several interesting scenarios are simulated by changing government expenditures, taxes, country risk, Total Factor Productivity, effectiveness of public capital and terms of trade. This analysis is relevant for the Bolivian economy, because the government is using fiscal policy as one of its main tool to attack poverty and aims to put public investment as the foremost instruments to promote growth and welfare.

Suggested Citation

  • Carlos Gustavo Machicado & Paul Estrada & Ximena Flores, 2010. "Public Expenditure Policy in Bolivia: Growth and Welfare," Development Research Working Paper Series 04/2010, Institute for Advanced Development Studies.
    • Handle: RePEc:adv:wpaper:201004
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    File URL: http://www.inesad.edu.bo/pdf/wp04_2010.pdf
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Public Expenditure Policy in Bolivia: Growth and Welfare
      by Christian Zimmermann in NEP-DGE blog on 2010-10-23 21:06:51

    More about this item

    Keywords

    Fiscal Policy; Infrastructure; Multisector Growth Model;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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