IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/626.html
   My bibliography  Save this paper

The macroeconomics of the public sector deficit : the case of Colombia

Author

Listed:
  • Easterly, William

Abstract

The management of fiscal deficits and their financing in Colombia has been generally sound. This paper shows how episodes of loose fiscal policy have been minor compared to other Latin American countries. The near-crisis of the early 1980s was addressed in a timely way through a sharp fiscal adjustment. An analysis shows this adjustment to have been a combination of good luck and fundamental policy changes, with more emphasis on the latter. The means of fiscal adjustment chosen were sometimes suboptimal from the standpoint of long-run growth, which will eventually require some fiscal reform to reverse some of the measures implemented during 1985-89. The analysis of this paper shows a close relationship between the means of financing of the fiscal deficit and macroeconomic outcomes in Colombia. A simulation model traces how money-financed and domestic debt-financed fiscal deficits translate into inflation and the real interest rate. It traces the relationship between externally-financed fiscal deficits and the real exchange rate and finds that a good deal of the changes in the real exchange rates over 1975-87 are attributable to fiscal policy. Finally, these models are combined to show how the external versus domestic debt financing affects the simultaneous determination of the real exchange rate and real interest rate.

Suggested Citation

  • Easterly, William, 1991. "The macroeconomics of the public sector deficit : the case of Colombia," Policy Research Working Paper Series 626, The World Bank.
  • Handle: RePEc:wbk:wbrwps:626
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1991/03/01/000009265_3960930222859/Rendered/PDF/multi_page.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Miguel Kiguel, 1994. "Exchange Rate Policy, the Real Exchange Rate, and Inflation," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 31(93), pages 229-250.
    2. ZeinabPartow, 2005. "La Relación Inflación-Crecimiento: Un Resumen Con Algunas Implicaciones Para Colombia," BORRADORES DE ECONOMIA 003079, BANCO DE LA REPÚBLICA.
    3. RAMDE, Fousseni, 2015. "Institution, investissements et croissance dans l’UEMOA: une approche panel VAR
      [Institution, investments and growth in WAEMU: a panel VAR approach]
      ," MPRA Paper 82417, University Library of Munich, Germany, revised 01 Jun 2017.
    4. Zeinab Partow, 1995. "La Relación Inflación-Crecimiento: Un Resúmen con algunas Implicaciones para Colombia," Borradores de Economia 023, Banco de la Republica de Colombia.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:626. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: http://edirc.repec.org/data/dvewbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.