Cover -- Title Page -- Contents -- Latin American Development Forum Series -- Other Titles in the Latin American Development Forum Series -- About the Contributors -- Acknowledgments -- Acronyms and Abbreviations -- 1 Overview: Fiscal Policy, Economic Fluctuations, and Growth -- I. Introduction -- II. Are Latin America's Old Fiscal Problems Over? -- III. Fiscal Policy and Macroeconomic Volatility: Dealing with the Procyclical Bias -- Effects and Determinants of Discretionary Fiscal Policies -- The Size and Role of Automatic Stabilizers -- Policies and Institutions to Deal with Procyclicality -- Procyclical Fiscal Policies and Fiscal Federalism -- IV. Fiscal Policy and Growth: Overcoming the Anti-Investment Bias -- The Anti-Investment Bias: Where Does It Come From?10 -- Dealing with the Anti-Investment Bias -- The selective approach -- Using fiscal targets and rules that remove the bias against investment -- Improving Investment Decisions -- Investment agencies -- Fiscal information -- Rethinking fiscal strategies -- V. Summing Up -- Notes -- References -- PART 1 Procyclical Fiscal Policy and Volatility -- 2 Fiscal Discipline, Volatility, and Growth -- I. Introduction: The Impact of Fiscal Policy on Macroeconomic Performance -- II. Fiscal Policy Biases and the Need for Discipline -- Volatile Fiscal Policy -- Procyclical Fiscal Policy -- Excessive Deficits -- III. Characterizing Fiscal Policy -- IV. The Effects of Institutions and Restrictions on Fiscal Policy -- Review of the Literature -- The Effects of Institutions and Political Constraints on Policy: Empirical Results -- Volatility of discretionary fiscal policy -- What affects policy persistence? -- What affects policy elasticity? -- V. The Macroeconomic Consequences of Different Fiscal Policy Institutions -- VI. Policy Implications: How to Restrict Fiscal Policy.

What Do We Mean by Restrictions? -- Two Lessons from the Recent EMU Experience -- The need to establish transparent goals -- The trade-off between flexibility and discipline -- Explicit versus Implicit Constraints -- Notes -- References -- 3 The Size and Effectiveness of Automatic Fiscal Stabilizers in Latin America -- I. Introduction -- II. The Size of Automatic Revenue Stabilizers in Latin America -- III. The Model Economy -- Optimizing Households -- Spenders -- Firms -- Government and Tax Structure -- Resource Constraints -- IV. Steady-State, Calibration, and Solution Methods -- Parameter Values and Steady-State Structure -- Solution Method -- V. Simulation Results -- Cyclical Properties -- Automatic Stabilizers in the LAC Region -- Automatic revenue stabilizers -- The stabilizing role of government size -- VI. Concluding Remarks -- Notes -- References -- 4 Fiscal Federalism and Procyclical Spending: The Cases of Argentina and Brazil -- I. Introduction -- II. Why Is Spending Procyclical? -- III. Fiscal Federalism Specificities: Argentina and Brazil -- Argentina6 -- Brazil -- IV. The Evidence: Procyclicality of Spending of Subnational Governments in Argentina and Brazil -- Argentina -- Testing the Sources of Procyclicality -- Brazil -- V. Conclusions -- Notes -- References -- 5 Fiscal Rules and Procyclicality -- I. Introduction -- II. Why Care About Fiscal Procyclicality? -- Excess Macroeconomic Volatility in Latin America Reduces Growth and is Especially Harmful for the Poor -- Procyclical Fiscal Policies May Exacerbate Macrovolatility in Latin America -- Procyclical Fiscal Policies Add Policy Risk to the Income Risk of the Poor -- Procyclical Biases May Lead to Deficit and Anti-Investment Biases in Fiscal Policies -- III. What Are the Causes of the Procyclical Bias of Fiscal Policies in Latin America? -- IV. Why Fiscal Rules May Help.

V. Conflicts Between Flexibility and Credibility: Toward Fiscal Rules That Reduce the Procyclical and Deficit Biases -- VI. The Experience with Fiscal Rules in Latin America -- The experience with commodity stabilization funds -- The experience with fiscal responsibility and stabilizing transfers laws -- The Chilean structural balance rule -- VII. Conclusions and Policy Implications -- Notes -- References -- PART 2 Fiscal Policy and Growth -- 6 Fiscal Discipline, Public Investment, and Growth -- I. Introduction -- II. Fiscal Adjustment and Public Investment -- III. The Theory and Practice of Fiscal Solvency -- The Arithmetic of Public Sector Solvency -- Public Investment, Growth, and Solvency -- Operations and Maintenance -- Reality Checks -- Discussion -- IV. Final Remarks -- Annex 6.1. Analytical Derivations -- 1. Derivation of Equation (8) -- 2. The Case of Constant Marginal Productivity -- Notes -- References -- 7 Incentives for Public Investment Under Fiscal Rules -- I. Introduction -- II. Fiscal Rules and Public Investment -- The Basic Analytics -- Cash-Balance Rule -- Operating-Balance Rule -- Permanent-Balance Rule -- Implications for Public Debt Financing and Net Revenue Requirements -- Principles of Long-Run Fiscal Policy -- Fiscal Sustainability -- Tax Smoothing -- Intergenerational Equity -- III. Capital Budgeting, Accounting, and Debt Finance -- Determining Debt-Financed Public Investment -- Accounting Principles -- Moral Hazard in Government -- The Scope of Capital Budgets -- IV. Survey of Current Practice -- Fiscal Rules -- Europe and the SGP -- Golden rules -- Public Infrastructure Agencies -- Public-Private Partnerships -- Impacts on Public Investment -- V. Recent Proposals for Reform -- VI. An Alternative Approach to Fiscal Rules -- VII. Conclusion -- Notes -- References.

8 Improving the Stability and Growth Pact Through Proper Accounting of Public Investment -- I. The Pact: Flaws and Reform Options -- II. The Arithmetic of Public Investment -- III. Should Balanced Budget Rules Exclude Net Investment? -- IV. Do Governments Need to Set Up an Investment Agency? -- V. Trying Some Numbers -- VI. Capital Budgets: The Experience of the United States -- VII. Doing This Within the Treaty: Article 104.3 -- VIII. Principles for the Institutional Design of Investment Agencies -- Notes -- References -- 9 Accrual Accounting, Long-Term Fiscal Projections, and Infrastructure Investment -- I. Overview -- II. The Need for a Long-Term View -- III. Traditional Fiscal Indicators -- IV. The Benefits of Accrual Accounting -- V. The Limits of Accrual Accounting -- Valuation of Infrastructure Assets -- Guarantees and Long-Term Purchase Contracts -- The Consolidation of Public Enterprises -- Uncertainty and Bias -- VI. Long-Term Fiscal Projections -- Annex 9.1. Solvency, Accounting, and Cash-Flow Projections -- Notes -- References -- 10 Growth and Fiscal Effects of Infrastructure Investment in Brazil -- I. Introduction -- II. Some Basic Stylized Facts -- III. The Growth Impact of Infrastructure -- IV. An Experiment on Cash Flow and Solvency -- V. Conclusion -- Annex 10.1 Dynamic System of Section III -- Notes -- References -- Index -- Back Cover.

Fiscal policy in Latin America has been guided primarily by short-term liquidity targets whose observance was taken as the main exponent of fiscal prudence, with attention focused almost exclusively on the levels of public debt and the cash deficit. Very little attention was paid to the effects of fiscal policy on growth and on macroeconomic volatility over the cycle. Important issues such as the composition of public expenditures (and its effects on growth), the ability of fiscal policy to stabilize cyclical fluctuations, and the currency composition of public debt were largely neglected. As a result, fiscal policy has often amplified cyclical volatility and dampened growth. Fiscal Policy, Stabilization, and Growth explores the conduct of fiscal policy in Latin America and its consequences for macroeconomic stability and long-term growth. In particular, the book highlights the procyclical and anti-investment biases embedded in the region's fiscal policies, explores their causes and macroeconomic consequences, and asesses their possible solutions.

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Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2018. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.