The Size and Effectiveness of Automatic Fiscal Stabilizers in Latin America

Suescú ; n, Rodrigo

World Bank, Washington, DC

关键词: ADJUSTMENT COST;    ADJUSTMENT COSTS;    AGGREGATE OUTPUT;    ARBITRAGE;    BENCHMARK;   

DOI  :  10.1596/1813-9450-4244
RP-ID  :  WPS4244

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper measures the size ofautomatic fiscal revenue stabilizers and evaluates theirrole in Latin America. It introduces a relatively rich taxstructure into a dynamic, stochastic, multi-sector smallopen economy inhabited by rule-of-thumb consumers (whoconsume their wages and do not save or borrow) and Ricardianhouseholds to study the stabilizing properties of differentparameters of the tax code. The economy faces multiplesources of business cycle fluctuations: (1) world capitalmarket shocks; (2) world business cycle shocks; (3) terms oftrade shocks; (4) government spending shocks; and (5)nontradable and (6) tradable sector technology innovations.Calibrating the model economy to a typical Latin Americaneconomy allows the evaluation of its ability to mimic theregion's observed business cycle frequency propertiesand the assessment of the quantitative relationship betweentax code parameters, business cycle forcing variables, andbusiness cycle behavior. The model captures many of thesalient features of Latin America's business cyclefacts and finds that the degree of smoothing provided by theautomatic revenue stabilizers-described by variousproperties of the tax system-is negligible. Simulationresults seem to suggest an invariance property formiddle-income countries: the amplitude of the business cycleis independent of the tax structure. And governmentsize-measured by the GDP ratio of government spending-playsthe role of an automatic stabilizer, but its smoothingeffect is very weak.