The Size and Effectiveness of Automatic Fiscal Stabilizers in Latin America
This paper measures the size of automatic fiscal revenue stabilizers and evaluates their role in Latin America. It introduces a relatively rich tax structure into a dynamic, stochastic, multi-sector small open economy inhabited by rule-of-thumb con...
| Main Author: | |
|---|---|
| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2007/06/7681011/size-effectiveness-automatic-fiscal-stabilizers-latin-america http://hdl.handle.net/10986/7072 |
| id |
okr-10986-7072 |
|---|---|
| recordtype |
oai_dc |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ADJUSTMENT COST ADJUSTMENT COSTS AGGREGATE OUTPUT ARBITRAGE BENCHMARK BONDS BORROWING BUDGET BALANCE BUDGET CONSTRAINT BUDGETARY POLICIES BUDGETARY POSITION BUSINESS CYCLE BUSINESS CYCLES BUSINESS INCOME BUSINESS INCOME TAXES CAPITA TERMS CAPITAL FLOWS CAPITAL GAINS CAPITAL INVESTMENT CAPITAL MARKET CAPITAL MARKETS CENTRAL GOVERNMENT CLOSED ECONOMY COMPARATIVE ADVANTAGE CONSTANT RETURNS CONSTANT RETURNS TO SCALE CONSUMERS CONSUMPTION EXPENDITURES CORPORATE INCOME CORPORATE TAXES COUNTRY REGRESSIONS COUNTRY REPORTS COUNTRY-BY-COUNTRY BASIS CROSS-COUNTRY STUDIES DEBT DEVELOPED COUNTRIES DEVELOPED WORLD DEVELOPING COUNTRIES DISCOUNT RATE DISCOUNTED VALUE DISCRETIONARY FISCAL POLICY DISCRETIONARY POLICY DISPOSABLE INCOME ECONOMIC ACTIVITY ECONOMIC FLUCTUATIONS ECONOMIC GROWTH ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL WORK EQUILIBRIUM EQUILIBRIUM DYNAMICS EXPECTED UTILITY EXPLANATORY VARIABLES EXPORTS EXTERNAL DEBT EXTERNAL SHOCKS FINANCIAL SECTOR FISCAL EXPENDITURE FISCAL MANAGEMENT FISCAL POLICIES FISCAL POLICY FISCAL REACTION FISCAL REACTION FUNCTION GDP GOVERNMENT BONDS GOVERNMENT BORROWING GOVERNMENT BUDGET GOVERNMENT DEBT GOVERNMENT EXPENDITURES GOVERNMENT FINANCE GOVERNMENT FINANCE STATISTICS GOVERNMENT REVENUE GOVERNMENT SPENDING GOVERNMENT SPENDING SHOCKS GROWTH RATE IMPERFECT SUBSTITUTES INCOME ELASTICITY INCOME SHARE INCOME TAX INCOME TAXATION INCOME TAXES INCOMES INDUSTRIAL ECONOMIES INFLATION RATE INTEREST RATES INTERNATIONAL TRADE LATIN AMERICAN LONG-TERM GROWTH MACROECONOMIC POLICIES MACROECONOMIC STABILITY MACROECONOMIC STABILIZATION MACROECONOMICS MARGINAL PRODUCTIVITY MEMBER COUNTRIES MONETARY POLICIES MONETARY POLICY MONETARY UNION NATIONAL INCOME NEGATIVE CORRELATION NET EXPORTS OPEN ECONOMY OPTIMIZATION OUTPUT GAP OUTPUT VOLATILITY PERSONAL INCOME PERSONAL INCOME TAX PERSONAL INCOME TAX SYSTEM PERSONAL INCOME TAXES POLICY CHANGES POLICY MEASURES POLICY RESEARCH POPULATION GROWTH POSITIVE CORRELATION POSITIVE RELATIONSHIP PRICE STABILITY PRIMARY BUDGET PRIMARY BUDGET BALANCE PRIMARY BUDGET SURPLUS PUBLIC CONSUMPTION PUBLIC DEBT PUBLIC FINANCE PUBLIC POLICY RANDOM WALK REAL INTEREST RATE REAL TERMS RELATIVE PRICE RELATIVE PRICES RESOURCE ALLOCATION REVENUE COLLECTION SECTORAL ALLOCATION SERIES DATA SOCIAL SECURITY SOCIAL SECURITY CONTRIBUTIONS STABILIZATION ROLE STATE GOVERNMENT TAX TAX BASE TAX BASES TAX LAW TAX PAYMENTS TAX RATE TAX RATES TAX REVENUE TAX STRUCTURE TAX SYSTEM TAXATION TOTAL FACTOR PRODUCTIVITY TOTAL OUTPUT UNEMPLOYMENT UNEMPLOYMENT COMPENSATION UNEMPLOYMENT INSURANCE UTILITY FUNCTIONS VALUE ADDED WAGES WEALTH ZERO ELASTICITY |
| spellingShingle |
ADJUSTMENT COST ADJUSTMENT COSTS AGGREGATE OUTPUT ARBITRAGE BENCHMARK BONDS BORROWING BUDGET BALANCE BUDGET CONSTRAINT BUDGETARY POLICIES BUDGETARY POSITION BUSINESS CYCLE BUSINESS CYCLES BUSINESS INCOME BUSINESS INCOME TAXES CAPITA TERMS CAPITAL FLOWS CAPITAL GAINS CAPITAL INVESTMENT CAPITAL MARKET CAPITAL MARKETS CENTRAL GOVERNMENT CLOSED ECONOMY COMPARATIVE ADVANTAGE CONSTANT RETURNS CONSTANT RETURNS TO SCALE CONSUMERS CONSUMPTION EXPENDITURES CORPORATE INCOME CORPORATE TAXES COUNTRY REGRESSIONS COUNTRY REPORTS COUNTRY-BY-COUNTRY BASIS CROSS-COUNTRY STUDIES DEBT DEVELOPED COUNTRIES DEVELOPED WORLD DEVELOPING COUNTRIES DISCOUNT RATE DISCOUNTED VALUE DISCRETIONARY FISCAL POLICY DISCRETIONARY POLICY DISPOSABLE INCOME ECONOMIC ACTIVITY ECONOMIC FLUCTUATIONS ECONOMIC GROWTH ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL WORK EQUILIBRIUM EQUILIBRIUM DYNAMICS EXPECTED UTILITY EXPLANATORY VARIABLES EXPORTS EXTERNAL DEBT EXTERNAL SHOCKS FINANCIAL SECTOR FISCAL EXPENDITURE FISCAL MANAGEMENT FISCAL POLICIES FISCAL POLICY FISCAL REACTION FISCAL REACTION FUNCTION GDP GOVERNMENT BONDS GOVERNMENT BORROWING GOVERNMENT BUDGET GOVERNMENT DEBT GOVERNMENT EXPENDITURES GOVERNMENT FINANCE GOVERNMENT FINANCE STATISTICS GOVERNMENT REVENUE GOVERNMENT SPENDING GOVERNMENT SPENDING SHOCKS GROWTH RATE IMPERFECT SUBSTITUTES INCOME ELASTICITY INCOME SHARE INCOME TAX INCOME TAXATION INCOME TAXES INCOMES INDUSTRIAL ECONOMIES INFLATION RATE INTEREST RATES INTERNATIONAL TRADE LATIN AMERICAN LONG-TERM GROWTH MACROECONOMIC POLICIES MACROECONOMIC STABILITY MACROECONOMIC STABILIZATION MACROECONOMICS MARGINAL PRODUCTIVITY MEMBER COUNTRIES MONETARY POLICIES MONETARY POLICY MONETARY UNION NATIONAL INCOME NEGATIVE CORRELATION NET EXPORTS OPEN ECONOMY OPTIMIZATION OUTPUT GAP OUTPUT VOLATILITY PERSONAL INCOME PERSONAL INCOME TAX PERSONAL INCOME TAX SYSTEM PERSONAL INCOME TAXES POLICY CHANGES POLICY MEASURES POLICY RESEARCH POPULATION GROWTH POSITIVE CORRELATION POSITIVE RELATIONSHIP PRICE STABILITY PRIMARY BUDGET PRIMARY BUDGET BALANCE PRIMARY BUDGET SURPLUS PUBLIC CONSUMPTION PUBLIC DEBT PUBLIC FINANCE PUBLIC POLICY RANDOM WALK REAL INTEREST RATE REAL TERMS RELATIVE PRICE RELATIVE PRICES RESOURCE ALLOCATION REVENUE COLLECTION SECTORAL ALLOCATION SERIES DATA SOCIAL SECURITY SOCIAL SECURITY CONTRIBUTIONS STABILIZATION ROLE STATE GOVERNMENT TAX TAX BASE TAX BASES TAX LAW TAX PAYMENTS TAX RATE TAX RATES TAX REVENUE TAX STRUCTURE TAX SYSTEM TAXATION TOTAL FACTOR PRODUCTIVITY TOTAL OUTPUT UNEMPLOYMENT UNEMPLOYMENT COMPENSATION UNEMPLOYMENT INSURANCE UTILITY FUNCTIONS VALUE ADDED WAGES WEALTH ZERO ELASTICITY Suescún, Rodrigo The Size and Effectiveness of Automatic Fiscal Stabilizers in Latin America |
| geographic_facet |
Latin America & Caribbean |
| relation |
Policy Research Working Paper; No. 4244 |
| description |
This paper measures the size of
automatic fiscal revenue stabilizers and evaluates their
role in Latin America. It introduces a relatively rich tax
structure into a dynamic, stochastic, multi-sector small
open economy inhabited by rule-of-thumb consumers (who
consume their wages and do not save or borrow) and Ricardian
households to study the stabilizing properties of different
parameters of the tax code. The economy faces multiple
sources of business cycle fluctuations: (1) world capital
market shocks; (2) world business cycle shocks; (3) terms of
trade shocks; (4) government spending shocks; and (5)
nontradable and (6) tradable sector technology innovations.
Calibrating the model economy to a typical Latin American
economy allows the evaluation of its ability to mimic the
region's observed business cycle frequency properties
and the assessment of the quantitative relationship between
tax code parameters, business cycle forcing variables, and
business cycle behavior. The model captures many of the
salient features of Latin America's business cycle
facts and finds that the degree of smoothing provided by the
automatic revenue stabilizers-described by various
properties of the tax system-is negligible. Simulation
results seem to suggest an invariance property for
middle-income countries: the amplitude of the business cycle
is independent of the tax structure. And government
size-measured by the GDP ratio of government spending-plays
the role of an automatic stabilizer, but its smoothing
effect is very weak. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Suescún, Rodrigo |
| author_facet |
Suescún, Rodrigo |
| author_sort |
Suescún, Rodrigo |
| title |
The Size and Effectiveness of Automatic Fiscal Stabilizers in Latin America |
| title_short |
The Size and Effectiveness of Automatic Fiscal Stabilizers in Latin America |
| title_full |
The Size and Effectiveness of Automatic Fiscal Stabilizers in Latin America |
| title_fullStr |
The Size and Effectiveness of Automatic Fiscal Stabilizers in Latin America |
| title_full_unstemmed |
The Size and Effectiveness of Automatic Fiscal Stabilizers in Latin America |
| title_sort |
size and effectiveness of automatic fiscal stabilizers in latin america |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2007/06/7681011/size-effectiveness-automatic-fiscal-stabilizers-latin-america http://hdl.handle.net/10986/7072 |
| _version_ |
1764401877812772864 |
| spelling |
okr-10986-70722021-04-23T14:02:33Z The Size and Effectiveness of Automatic Fiscal Stabilizers in Latin America Suescún, Rodrigo ADJUSTMENT COST ADJUSTMENT COSTS AGGREGATE OUTPUT ARBITRAGE BENCHMARK BONDS BORROWING BUDGET BALANCE BUDGET CONSTRAINT BUDGETARY POLICIES BUDGETARY POSITION BUSINESS CYCLE BUSINESS CYCLES BUSINESS INCOME BUSINESS INCOME TAXES CAPITA TERMS CAPITAL FLOWS CAPITAL GAINS CAPITAL INVESTMENT CAPITAL MARKET CAPITAL MARKETS CENTRAL GOVERNMENT CLOSED ECONOMY COMPARATIVE ADVANTAGE CONSTANT RETURNS CONSTANT RETURNS TO SCALE CONSUMERS CONSUMPTION EXPENDITURES CORPORATE INCOME CORPORATE TAXES COUNTRY REGRESSIONS COUNTRY REPORTS COUNTRY-BY-COUNTRY BASIS CROSS-COUNTRY STUDIES DEBT DEVELOPED COUNTRIES DEVELOPED WORLD DEVELOPING COUNTRIES DISCOUNT RATE DISCOUNTED VALUE DISCRETIONARY FISCAL POLICY DISCRETIONARY POLICY DISPOSABLE INCOME ECONOMIC ACTIVITY ECONOMIC FLUCTUATIONS ECONOMIC GROWTH ELASTICITY ELASTICITY OF SUBSTITUTION EMPIRICAL WORK EQUILIBRIUM EQUILIBRIUM DYNAMICS EXPECTED UTILITY EXPLANATORY VARIABLES EXPORTS EXTERNAL DEBT EXTERNAL SHOCKS FINANCIAL SECTOR FISCAL EXPENDITURE FISCAL MANAGEMENT FISCAL POLICIES FISCAL POLICY FISCAL REACTION FISCAL REACTION FUNCTION GDP GOVERNMENT BONDS GOVERNMENT BORROWING GOVERNMENT BUDGET GOVERNMENT DEBT GOVERNMENT EXPENDITURES GOVERNMENT FINANCE GOVERNMENT FINANCE STATISTICS GOVERNMENT REVENUE GOVERNMENT SPENDING GOVERNMENT SPENDING SHOCKS GROWTH RATE IMPERFECT SUBSTITUTES INCOME ELASTICITY INCOME SHARE INCOME TAX INCOME TAXATION INCOME TAXES INCOMES INDUSTRIAL ECONOMIES INFLATION RATE INTEREST RATES INTERNATIONAL TRADE LATIN AMERICAN LONG-TERM GROWTH MACROECONOMIC POLICIES MACROECONOMIC STABILITY MACROECONOMIC STABILIZATION MACROECONOMICS MARGINAL PRODUCTIVITY MEMBER COUNTRIES MONETARY POLICIES MONETARY POLICY MONETARY UNION NATIONAL INCOME NEGATIVE CORRELATION NET EXPORTS OPEN ECONOMY OPTIMIZATION OUTPUT GAP OUTPUT VOLATILITY PERSONAL INCOME PERSONAL INCOME TAX PERSONAL INCOME TAX SYSTEM PERSONAL INCOME TAXES POLICY CHANGES POLICY MEASURES POLICY RESEARCH POPULATION GROWTH POSITIVE CORRELATION POSITIVE RELATIONSHIP PRICE STABILITY PRIMARY BUDGET PRIMARY BUDGET BALANCE PRIMARY BUDGET SURPLUS PUBLIC CONSUMPTION PUBLIC DEBT PUBLIC FINANCE PUBLIC POLICY RANDOM WALK REAL INTEREST RATE REAL TERMS RELATIVE PRICE RELATIVE PRICES RESOURCE ALLOCATION REVENUE COLLECTION SECTORAL ALLOCATION SERIES DATA SOCIAL SECURITY SOCIAL SECURITY CONTRIBUTIONS STABILIZATION ROLE STATE GOVERNMENT TAX TAX BASE TAX BASES TAX LAW TAX PAYMENTS TAX RATE TAX RATES TAX REVENUE TAX STRUCTURE TAX SYSTEM TAXATION TOTAL FACTOR PRODUCTIVITY TOTAL OUTPUT UNEMPLOYMENT UNEMPLOYMENT COMPENSATION UNEMPLOYMENT INSURANCE UTILITY FUNCTIONS VALUE ADDED WAGES WEALTH ZERO ELASTICITY This paper measures the size of automatic fiscal revenue stabilizers and evaluates their role in Latin America. It introduces a relatively rich tax structure into a dynamic, stochastic, multi-sector small open economy inhabited by rule-of-thumb consumers (who consume their wages and do not save or borrow) and Ricardian households to study the stabilizing properties of different parameters of the tax code. The economy faces multiple sources of business cycle fluctuations: (1) world capital market shocks; (2) world business cycle shocks; (3) terms of trade shocks; (4) government spending shocks; and (5) nontradable and (6) tradable sector technology innovations. Calibrating the model economy to a typical Latin American economy allows the evaluation of its ability to mimic the region's observed business cycle frequency properties and the assessment of the quantitative relationship between tax code parameters, business cycle forcing variables, and business cycle behavior. The model captures many of the salient features of Latin America's business cycle facts and finds that the degree of smoothing provided by the automatic revenue stabilizers-described by various properties of the tax system-is negligible. Simulation results seem to suggest an invariance property for middle-income countries: the amplitude of the business cycle is independent of the tax structure. And government size-measured by the GDP ratio of government spending-plays the role of an automatic stabilizer, but its smoothing effect is very weak. 2012-06-04T21:40:38Z 2012-06-04T21:40:38Z 2007-06 http://documents.worldbank.org/curated/en/2007/06/7681011/size-effectiveness-automatic-fiscal-stabilizers-latin-america http://hdl.handle.net/10986/7072 English Policy Research Working Paper; No. 4244 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean |