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Is Fiscal Policy Alone Enough for Growth ? A Simulation Analysis for Bolivia

Author

Listed:
  • Carlos Gustavo Machicado
  • Paul Estrada
  • Ximena Flores

Abstract

This paper develops a dynamic stochastic general equilibrium (DSGE) model to analyze the growth effects of fiscal policy in Bolivia. It is a multi-sector model with five representative sectors for the Bolivian economy: Non-tradables, importables, hydrocarbons, mining and agriculture. Public capital is included as a production factor in each of these sectors. The model is calibrated and a number of interesting scenarios are simulated by modifying each of the available fiscal policy instruments. In particular, we analyze the sustainability of Bolivian social policy based on government transfers to households along with the short- and long-run implications of fiscal policy for growth and welfare. We find that fiscal policy alone is unable to generate high rates of growth: it must be accompanied by an efficient provision of public capital and productivity boosts in the economic sectors.

Suggested Citation

  • Carlos Gustavo Machicado & Paul Estrada & Ximena Flores, 2011. "Is Fiscal Policy Alone Enough for Growth ? A Simulation Analysis for Bolivia," Working Papers MPIA 2011-10, PEP-MPIA.
    • Handle: RePEc:lvl:mpiacr:2011-10
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    File URL: https://portal.pep-net.org/documents/download/id/17743
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    Cited by:

    1. Bernadette Biatour & Chantal Kegels & Jan van der Linden & Dirk Verwerft, 2017. "Working Paper 01-17 - Public Investment in Belgium - Current State and Economic Impact," Working Papers 1701, Federal Planning Bureau, Belgium.

    More about this item

    Keywords

    Fiscal policy; Infrastructure; multi-sector growth model;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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