By Guillermo E. Perry, Luis Servén, Rodrigo Suescún
Economic coverage in Latin the USA has been guided essentially by way of temporary liquidity objectives whose observance was once taken because the major exponent of monetary prudence, with recognition targeted nearly solely at the degrees of public debt and the money deficit. little or no consciousness was once paid to the results of financial coverage on progress and on macroeconomic volatility over the cycle. very important matters equivalent to the composition of public costs (and its results on growth), the facility of economic coverage to stabilize cyclical fluctuations, and the forex composition of public debt have been principally ignored. accordingly, economic coverage has frequently amplified cyclical volatility and dampened development. financial coverage, Stabilization, and progress explores the behavior of financial coverage in Latin the US and its effects for macroeconomic balance and long term progress. specifically, the booklet highlights the procyclical and anti-investment biases embedded within the region's monetary rules, explores their reasons and macroeconomic effects, and asesses their attainable recommendations.
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Additional resources for Fiscal Policy, Stabilization, and Growth: Prudence or Abstinence? (Latin American Development Forum)
9 Sub-Saharan Africa: Overall Deficit and Public Infrastructure Investment (regional average) 5 % of GDP 4 3 2 1 0 1980–85 1986–90 infrastructure 1991–95 1996–2001 deficit Source: Estache 2005. ” The rationale was that such adjustments were indispensable to establish fiscal solvency, and that they would bring lower interest rates and increased capital inflows and, hence, higher private investment and growth. But by focusing the retrenchment on infrastructure spending, the fiscal adjustment became like “walking up the down escalator” (in the phrase of Easterly, Irwin, and Servén 2007).
Building such information will typically involve construction of long-term projections of cash revenues and expenditures. Chapter 9 by Irwin in this volume reviews the changes that this shift would involve and the practical difficulties it may 31 encounter. 1, taken from Easterly, Irwin, and Servén (2007), offers a comparative summary of how cash accounting, accrual accounting, and long-term projections stack up in terms of key criteria: (a) their ability to provide standard information on liquidity and on net worth, (b) their flexibility to accommodate uncertainty, and (c) their usefulness in preventing the fiscal authorities from overstating their long-term prospects by resorting to biased forecasts of future fiscal performance.
There is nothing new about sheltering selected expenditures from the action of fiscal targets. Indeed, it has been common practice in several Latin American countries, albeit in a nontransparent way, by shifting public investment projects and their financing off-budget. This has often been done through the assumption by the government of the investment risk of private sector projects, in the form of service purchase agreements in public-private partnerships, revenue guarantees, and similar devices, which are seldom recorded in the fiscal accounts and sometimes not even disclosed.
Fiscal Policy, Stabilization, and Growth: Prudence or Abstinence? (Latin American Development Forum) by Guillermo E. Perry, Luis Servén, Rodrigo Suescún