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Strengthening Chile's Rule-Based Fiscal Framework

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  • Ms. Teresa Daban Sanchez

Abstract

The cornerstone of Chile’s impressive fiscal performance has been its structural balance rule. By insulating public spending from short-term copper price fluctuations and the business cycle, the rule has helped preserve fiscal discipline. However, the implementation of the rule in recent years has revealed certain challenges, and in May 2010, the government established a high-level commission to recommend reforms that could make the rule even more effective. This paper assesses the scope for improving the design and implementation of the structural balance rule in light of best practices and OECD country experience with fiscal rules. This assessment suggests several options to strengthen Chile’s fiscal rule, including by simplifying the calculation of the structural balance; enhancing the rule’s flexibility, transparency and accountability; and complementing it with a medium-term fiscal framework.

Suggested Citation

  • Ms. Teresa Daban Sanchez, 2011. "Strengthening Chile's Rule-Based Fiscal Framework," IMF Working Papers 2011/017, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2011/017
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    References listed on IDEAS

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    1. International Monetary Fund, 2005. "Bangladesh: Report on the Observance of Standards and Codes: Fiscal Transparency Module: Update," IMF Staff Country Reports 2005/328, International Monetary Fund.
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    Cited by:

    1. Aizenman, Joshua & Edwards, Sebastian & Riera-Crichton, Daniel, 2012. "Adjustment patterns to commodity terms of trade shocks: The role of exchange rate and international reserves policies," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 1990-2016.

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