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Asimetría en la reacción de la política fiscal discrecional al ciclo del PIB y efectos sobre la deuda: un análisis del caso uruguayo

Author

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  • Guillermo Santos

    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

  • Yael Stolovas

Abstract

The aim of this paper is to study empirical evidence supporting the hypothesis that discretionary fiscal policy is asymmetric over the business cycle in Uruguay. We estimate fiscal reaction functions covering annual data from 1970 through 2009, in which the dynamics of fiscal balance is due to structural and cyclical factors. We find evidence that discretionary fiscal policy has been asymmetric over the business cycle, reacting strongly in “good times” and weakly during “bad times”. Furthermore, discretionary fiscal policy has been procyclical during “good times”, but acyclical in economics downturns. Considering the reaction of discretionary fiscal policy during “bad times”, we find evidence that it has been countercyclical during soft economic downturns and slightly procyclical in contexts of significant economic crisis. Finally, we improve an exercise to assess the consequences of this cyclical pattern of discretionary fiscal policy over debt/GDP ratio, concluding that could have contributed to debt accumulation over the period.

Suggested Citation

  • Guillermo Santos & Yael Stolovas, 2012. "Asimetría en la reacción de la política fiscal discrecional al ciclo del PIB y efectos sobre la deuda: un análisis del caso uruguayo," Documentos de Trabajo (working papers) 0812, Department of Economics - dECON.
    • Handle: RePEc:ude:wpaper:0812
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    File URL: https://hdl.handle.net/20.500.12008/353
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    More about this item

    Keywords

    fiscal policy; cyclical asymmetry; fiscal procyclicicality; debt accumulation;
    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
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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