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Long-term effects of fiscal policy in Uruguay

Author

Listed:
  • Leonel Muinelo-Gallo

    () (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)

  • Oriol Roca-Sagalés

    () (Universitat Autònoma de Barcelona (Spain). Departamentd’Economia Aplicada)

Abstract

Despite being one of the countries with lower levels of inequality in Latin America, Uruguay is characterized by persistent high inequality levels in relation to that upper-middle or high income countries with similar relative size of the public sector. This paper investigates to what extent these two features are interconnected and whether economic growth affects and is affected by this relationship. Empirical results from Vector Autoregression (VAR) models reveal the existence of important long-run Keynesian effects associated to public expenditure, and that the country’s expenditure structure is, in part, responsible for increasing disposable household’s income inequality, being the public investment the only fiscal policy that breaks this tendency.

Suggested Citation

  • Leonel Muinelo-Gallo & Oriol Roca-Sagalés, 2017. "Long-term effects of fiscal policy in Uruguay," Documentos de Trabajo (working papers) 17-02, Instituto de Economía - IECON.
  • Handle: RePEc:ulr:wpaper:dt-02-17
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    fiscal policy; economic growth; income inequality; VAR models; Uruguay;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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