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Fiscal Adjustment in Latin America and the Caribbean : Short-Run Pain, Long-Run Gain (Inglês)

After a growth slowdown that lasted six years, including a contraction of one percent of real Gross domestic product (GDP) in 2016, the Latin America and the Caribbean (LAC) region has finally turned the corner and resumed an increasing growth path. Specifically, LAC is estimated to have grown by 1.1 percent in 2017 and expected to grow by 1.8 percent in 2018 and 2.3 percent in 2019. Finally, while the long-awaited monetary policy normalization in the United States is firming up, emerging markets can take solace in its very gradual nature. The external environment continues to provide a gentle push to the region’s growth. Given the benign external environment, the fragile fiscal situation of most LAC countries continues to be the main macroeconomic concern. In the long run, lower fiscal deficits, and hence lower public debt burdens would help consolidate the impressive gains achieved by the region in terms of lowering inflation, reducing poverty and inequality, and increasing long-run growth. This book is arranged as follows. Chapter 1 discusses about the growth and fiscal challenges in LAC region. Chapter 2, the core of the report, takes a detailed look at the short and long-run effects of fiscal adjustments in the region and how they have evolved over time. Chapter 3 reviews the recent growth performance in the LAC region and conducted a detailed analysis of the current fragile fiscal situation, including getting a quantitative sense of the order of magnitude of the fiscal adjustments that may be needed and the short and long-run effects of such fiscal adjustments.


  • Autor

    Végh,Carlos A., Vuletin,Guillermo Javier, Riera-Crichton,Daniel, Friedheim,Diego, Morano,Luis, Camarena,José Andrée

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  • TIpo de documento

    Documento de Trabalho

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  • Total Volume(s)


  • País

    América Latina,

  • Região

    América Latina e Caribe,

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  • Nome do documento

    Fiscal Adjustment in Latin America and the Caribbean : Short-Run Pain, Long-Run Gain?

  • Palavras-chave

    fiscal adjustment; real gdp; primary balance; cuts in government spending; debt level; fiscal deficit; primary surplus; external factor; investment grade status; increases in revenues; commodity price data; terms of trade; real interest rate; investment grade rating; stock of debt; persistent fiscal deficits; real growth rate; average spot price; cost of capital; improvement in governance; public infrastructure investment; deceleration in growth; price of commodities; primary fiscal deficit; fiscal adjustment package; fiscal adjustment episode; engine of growth; investment grade debt; international financial market; high debt levels; effects of hurricane; net capital outflow; public debt burden; Poverty & Inequality; privileges and immunity; trade and investment; degree of heterogeneity; gdp growth rate; tight monetary policy; fiscal situation; natural disaster; domestic factor; commodity export; inflation rate; fiscal balance; Fiscal policies; oil price; fiscal problem; fiscal policy; commodity boom; conventional wisdom; humanitarian crisis; independent variable; regression line; output loss; external environment; social transfer; linear regression; linear function; linear scale; steady state; negative relationship; primary deficit; debt stock; academic study; numerical value; social condition; fiscal authority; adjustment path; average risk; negative slope; public need; net debt; silver lining; tax base; fiscal burden; fixed effect; permanent expenditure; high elasticity; treasury note; public finance; unemployment level; open economy; determining growth; international liquidity; copper price; commercial partners; tax hike; phillips curve; inverse relationship; regional performance; important component; empirical analysis; net outflow; public policy; tax rate; output cost; primary spending; high commodity; increasing growth; cumulative loss; private debt; fiscal rule; fiscal space; lower inflation; Fiscal Reform; administrative support; commercial purpose; original work; copyright owner; median real; Financial Stability; domestic sources; predicted growth; political upheaval; financial integration; explanatory variable; unit spending; increased competition; econometric model; land transportation



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