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Fiscal Policy Rules: Evidence From Chilean Economy

Author

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  • Ryszard Piasecki
  • Erico Wulf B

Abstract

This paper analyzes, structural budget surplus (SBS) rule evidence for the Chilean economy. We examine its effect on macroeconomic variables, such as credit worthiness, output volatility, policy effectiveness ,and welfare level gains over time due to economic growth. Thus, SBS becomes a public good with undeniable positive externalities which government authorities are called to provide. Moreover, countries depending upon commodities exports, must deal with the implications of associated prices increases and impact on expectations about spending; the risk of inflationary pressures; internal and external imbalances . Fiscal rules instead, provide a safety net for public income fluctuations, keeping stable cyclical adjusted spending , and saving the surplus due to higher public incomes.

Suggested Citation

  • Ryszard Piasecki & Erico Wulf B, 2014. "Fiscal Policy Rules: Evidence From Chilean Economy," Review of Business and Finance Studies, The Institute for Business and Finance Research, vol. 5(2), pages 45-54.
    • Handle: RePEc:ibf:rbfstu:v:5:y:2014:i:2:p:45-54
    as

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    References listed on IDEAS

    as
    1. Joachim Voth, 2011. "Tightening Tensions: Fiscal Policy and Civil Unrest in Eleven South American Countries, 1937 - 1995," Working Papers Central Bank of Chile 612, Central Bank of Chile.
    2. Michel Strawczynski & Joseph Zeira, 2013. "Procyclicality of Fiscal Policy in Emerging Countries: The Cycle is the Trend," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Felipe Céspedes & Jordi Galí (ed.),Fiscal Policy and Macroeconomic Performance, edition 1, volume 17, chapter 11, pages 427-466, Central Bank of Chile.
    3. Ignacio Lozano & Hernán Rincón & Miguel Sarmiento & Jorge Ramos, 2008. "Regla fiscal cuantitativa para consolidar y blindar las finanzas públicas de Colombia," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 10(19), pages 311-352, July-Dece.
    4. Osvaldo Larrañaga & Jorge Marshall, 1992. "Shocks Externos y Política Fiscal," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 29(86), pages 115-140.
    5. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    6. Larraín B., Felipe & Parro, Francisco, 2008. "Chile menos volátil," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(299), pages 563-596, julio-sep.
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    More about this item

    Keywords

    Rules; Budget Surplus; Policy Coordination;
    All these keywords.

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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