Fiscal Policy in Developing Countries : A Framework and Some Questions

This paper surveys fiscal policy in developing countries from the point of view of long-run growth. The first section reviews existing methodologies to estimate the effects of fiscal policy shocks and of systematic fiscal policy, with time series o...

Full description

Bibliographic Details
Main Author:	Perotti, Roberto
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING AGGREGATE DEMAND AUTOMATIC STABILIZER AUTOMATIC STABILIZERS BAILOUT BINDING CONSTRAINT BUDGET AGGREGATES BUDGET BALANCE BUDGET CONSTRAINT BUDGET DEFICIT BUDGET OUTCOMES BUDGET RESOURCES BUDGET RULES BUDGET SURPLUS BUDGETARY POLICY BUSINESS CYCLE CAPITAL FLOWS CAPITAL FORMATION CAPITAL INFLOWS CAPITAL SPENDING CAPITAL STOCK CAPITAL STOCKS CASH TRANSFER COMMODITY PRICES CONSUMPTION SMOOTHING CONTINGENT LIABILITIES COST OF CAPITAL COST-BENEFIT ANALYSIS CREATIVE ACCOUNTING CREDIBILITY CREDIT CONSTRAINTS CREDIT MARKET CREDIT MARKETS CREDITWORTHINESS CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT DEFICITS CURRENT ACCOUNT SURPLUS DATA AVAILABILITY DEBT DEFAULT DEBT FINANCING DEBT LEVEL DEBT LIMIT DEBT OUTSTANDING DEBT RATIO DEBTS DEFICITS DERIVATIVE DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DISCRETIONARY FISCAL POLICY DISTRIBUTIONAL EFFECTS DISTRIBUTIONAL IMPACT DISTRIBUTIONAL IMPACTS DISTRIBUTIONAL OBJECTIVES DUMMY VARIABLES ECONOMIC CONDITIONS ECONOMIC POLICY EDUCATION SPENDING EFFECTS OF SHOCKS ELASTICITIES EXOGENOUS SHOCKS EXPENDITURE EXTERNAL FUNDING FINANCE MINISTRY FINANCIAL CONSTRAINTS FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENTS FINANCIAL MARKET FINANCIAL POSITION FINANCIAL SYSTEM FISCAL AGGREGATES FISCAL CRISIS FISCAL DATA FISCAL DISCIPLINE FISCAL FEDERALISM FISCAL OPERATIONS FISCAL PERFORMANCE FISCAL POLICIES FISCAL POLICY FISCAL PROBLEMS FISCAL PROGRAM FISCAL REVENUE FISCAL RULE FISCAL RULES FISCAL STANCE FOREIGN RESERVES FORMAL SECTOR GDP GOLDEN RULE GOVERNMENT ACCOUNTS GOVERNMENT ASSETS GOVERNMENT BUDGET GOVERNMENT BUDGET CONSTRAINT GOVERNMENT BUDGETS GOVERNMENT CONSUMPTION GOVERNMENT DEBT GOVERNMENT DEFICIT GOVERNMENT INVESTMENT GOVERNMENT REVENUES GOVERNMENT SPENDING GROWTH RATE HEALTH SPENDING HIGHER DEFICITS HIGHER GOVERNMENT SPENDING HIGHER INFLATION HOLDING HUMAN CAPITAL INCOME TAXES INFLATION RATE INFRASTRUCTURE INVESTMENT INFRASTRUCTURE PROJECTS INITIAL DEBT INSURANCE INSURANCE POLICY INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL MARKETS INTERNATIONAL CREDIT INTERNATIONAL FINANCIAL MARKETS INTERNATIONAL INVESTORS INVESTMENT POLICIES INVESTMENT PROJECTS INVESTMENT SPENDING LEVEL OF DEBT LIABILITY LIQUIDITY LIQUIDITY PREMIUM MACROECONOMIC STABILITY MARGINAL CHANGE MARGINAL RATE MARGINAL UTILITIES OF CONSUMPTION MARGINAL UTILITY OF CONSUMPTION MARKET ACCESS MARKET CONFIDENCE MONETARY AUTHORITIES MONETARY POLICY NATIONAL AUTHORITIES NEGATIVE SHOCK NEGATIVE SHOCKS NEOCLASSICAL MODELS NET DEBT NET INVESTMENT NET WORTH OIL PRICES OUTSTANDING DEBT PENSION PENSIONS POLITICAL APPOINTEES POLITICAL ECONOMY POLITICIANS POSITIVE COEFFICIENT PRECAUTIONARY SAVINGS PRIVATE CAPITAL PRIVATE CONSUMPTION PRIVATE INVESTMENT PRIVATE INVESTORS PRIVATE SAVINGS PRIVATE SECTOR PROGRAMS PUBLIC CAPITAL PUBLIC DEBT PUBLIC ENTERPRISES PUBLIC EXPENDITURE PUBLIC FINANCE PUBLIC FINANCES PUBLIC GOODS PUBLIC INFRASTRUCTURE PUBLIC INVESTMENT PUBLIC SECTOR PUBLIC TRANSPORTATION RATE OF INFLATION RATE OF RETURN RATES OF RETURN RATES OF RETURNS REAL EXCHANGE RATE REAL INTEREST REAL INTEREST RATE REAL WAGE RELATIVE PRICES RESERVE RESERVES RETURNS RISK NEUTRAL SHOCK TO INCOME SIZE OF GOVERNMENT SOCIAL ASSISTANCE SOCIAL INSURANCE SOCIAL RETURN SOCIAL RETURNS SOCIAL SECURITY SOCIAL WELFARE SOLVENCY STABILIZATION POLICIES SUSTAINABILITY ANALYSIS TAX TAX BURDEN TAX CUTS TAX RATE TAX RATES TAX REDUCTION TAX REVENUE TAX REVENUES TAX SHOCKS TAXATION TAXPAYERS TRADE BALANCE TRADING TRANSPARENCY TREATY UNCERTAINTY VALUATION WAGES WEALTH EFFECT WORLD FINANCIAL MARKETS
Online Access:	http://documents.worldbank.org/curated/en/2007/09/8341115/fiscal-policy-developing-countries-framework-some-questions http://hdl.handle.net/10986/7359

Description
Summary:	This paper surveys fiscal policy in developing countries from the point of view of long-run growth. The first section reviews existing methodologies to estimate the effects of fiscal policy shocks and of systematic fiscal policy, with time series or with cross-sectional methods, and their applicability to developing countries. The second section surveys optimal fiscal policy in developing countries, by considering the role of the intertemporal government budget, and sustainability and solvency. It also reviews the fuzzy debate on "fiscal space" and "macroeconomic space" - and the usefulness (or lack thereof) of these terms for policy analysis. The third section asks what theory tells us about the optimal cyclical behavior of fiscal policy in developing countries. It shows that it very much depends on the assumptions about the interactions between credit market imperfections at the individual, firms, or government level, and on the supply of external funds to the country. Different sets of assumptions lead to different implications about optimal cyclical behavior. The available evidence on the cyclical behavior of fiscal policy, and possible reasons for the observed prevalence of a procyclical behavior in developing countries, is also reviewed. If one agrees that fiscal policy is indeed less countercyclical than we think is optimal, the issue is how to correct the problem. One obvious question is why government do not self-insure, i.e. why they do not accumulate assets in upturns and decumulate them in downturns. This leads to the analysis of fiscal rules and stabilization funds, in the fourth section. The last section concludes with what the author considers important research and policy questions in each part.

Fiscal Policy in Developing Countries : A Framework and Some Questions

Similar Items