Ángel Melguizo

Fiscal Policy in Latin America: Countercyclical and Sustainable?

This paper analyses fiscal policy for several economies in Latin America, from the early nineties to the 2009 crisis. We present original estimates of cyclically-adjusted public revenues for Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru and Uruguay implementing the standardised OECD methodology and extending it to include commodity cycles, which have a direct and significant effect on the fiscal balance of several Latin American countries. Based on these estimates, we evaluate the size of automatic tax stabilisers and the cyclicality of discretionary fiscal policy. Additionally, we highlight the uncertainty stemming from the estimation of the output gap, due to large and simultaneous cyclical, temporary and permanent shocks in several Latin American economies.

Projecting Pension Expenditures in Spain: On Uncertainty, Communication and Transparency

In this paper we suggest a set of indicators about the future performance of the Spanish public pension system and a suitable method of representing their uncertainty, in order to improve the communication to the public opinion about its main future challenges. Spain seems a particularly interesting case in Europe to illustrate our proposals, since the social security system has been in surplus for nine consecutive years, in sharp contrast to the projections made just a decade ago, but, at the same time, most projections foresee for Spain one of the highest increases in public expenditure among EU countries due to ageing. We argue that simple, transparent, credible, public and periodic indicators, which take explicitly into account the uncertainty about future demographic, economic and institutional developments, may contribute to improve the debate on the policies needed to strengthen the pension system.

What Drives Tax Morale? A Focus on Emerging Economies

This paper reviews the literature and contributes with some evidence based on the World Values Survey on the drivers of tax morale worldwide, with an emphasis on developing countries. It shows that socio-economic factors such as age, religion, gender, employment status and educational attainment have a significant impact on people’s levels of tax morale. In terms of institutional determinants, satisfaction with democracy, trust in government and the satisfaction with the quality of public services play an important role in increasing tax morale. The paper also discusses future directions for research and policy action in this area

Pension Reform and Fiscal Policy: Some Lessons from Chile

In this paper we analyze the short and medium term fiscal costs stemming from structural pension reform, taking Chile as workhorse. The Chilean pension system, based on individual capital accounts managed by the private sector, has been in operation for almost 30 years, providing a rich evidence of the impact of pension systems on public accounts. Besides, a recent reform that crucially changes the solidarity pillar is being implemented now. In the paper we argue that although much lower than its benefits, fiscal transition costs tend to be high and persistent, so a fiscal consolidation prior to the reform is advisable. This also allows filling the coverage holes that labour market informality generates, as illustrated for Chile, Colombia, Mexico and Peru. Finally, in more general terms, the exportability of this type of pension reform depends not only on its specific design, but on the quality of market and public institutions.

Better pensions, better jobs: status and alternatives toward universal pension coverage in Latin America and the Caribbean

This article offers an overview of the current state of labor markets and pension coverage in a wide sample of Latin America and the Caribbean countries, and proposes a series of possible avenues toward universal coverage, not only as an instrument to fight poverty during old age, but also as part of an agenda for increasing formal employment and productivity growth. We conclude that despite perspectives of low economic growth and reduced fiscal space, the region is going through intense demographic and socio-economic changes, which increase the demand for better jobs and provide a real opportunity for initiating the bold reforms in pensions, labor, and taxes needed to achieve universal coverage.

Fiscal Policy and the Cycle in Latin America: The Role of Financing Conditions and Fiscal Rules

Their strong macroeconomic position when the financial crisis erupted allowed Latin American economies to mitigate its impact through fiscal expansions, reversing the characteristic procyclical behaviour of fiscal policy. At the same time, in the last two decades fiscal rules have been extensively adopted in the region. This paper analyses the stabilising role of discretionary fiscal policy over time, and the role of fiscal financing conditions and fiscal rules in the behaviour of a sample of eight Latin American economies. The analysis shows three main results: i) fiscal policies became countercyclical during the crisis, but they have turned procyclical again in recent years; ii) financing conditions are confirmed to be a key driver of the fiscal stance, although their relevance has recently diminished; and iii) fiscal rules are associated with a more marked stabilising role for fiscal policy.

Covering the Uncovered: Labor Informality, Pensions and the Emerging Middle Class in Latin America

Innovative social policy instruments, notably conditional cash transfers, have been effective in reducing poverty in many Latin American countries.1 As a result, many households have recently succeeded in moving out of poverty and joining the ranks of the so-called emerging middle classes. This chapter will demonstrate, however, that many of these middle-class workers are still vulnerable to significant downward mobility if they are hit by negative shocks, such as illness, disability, job loss or a significant decline in income after retirement.

Political Attitudes of the Middle Class: The Case of Fiscal Policy

Fiscal policy — the way taxes and expenditures are allocated across society — reflects the political equilibrium within a given society.1 This equilibrium is determined by multiple factors, such as the preferences of citizens for redistribution (that is, taxes and public spending that disproportionately benefit the least well off) and other socioeconomic and political dimensions, the distribution of power within society, the degree of influence of interest groups on the policymaking process and the political institutions that condition this process, just to mention some of the most commonly analyzed political variables.2

Fiscal policy in Latin America: better after all?

This paper analyses fiscal policy for several economies in Latin America, from the early nineties to the 2009 crisis. We present original estimates of cyclically-adjusted public revenues for Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru and Uruguay implementing the standardised OECD methodology and extending it to include commodity cycles, which have a direct and significant effect on the fiscal balance of several Latin American countries. Based on these estimates, we evaluate the size of automatic tax stabilisers and the cyclicality of discretionary fiscal policy. Additionally, we highlight the uncertainty stemming from the estimation of the output gap, due to large and simultaneous cyclical, temporary and permanent shocks in several Latin American economies.

The New Economy in Spain: Situation and Prospects

The purpose of this study is to assess the potential macroeconomic benefits which would accrue if the conditions ultimately arise for the new economy to take root in Spain. The paper is divided into four sections. The first contains a theoretical analysis of the potential macroeconomic benefits of the new economy in the context of various economic models. Section two carries out two empirical exercises to quantify the new economy’s potential impact on the Spanish economy’s main macroeconomic variables. The third section addresses the microeconomic repercussions of the new economy. The final section reviews Spain’s initial conditions and degree of adaptation to the new economy by comparing a number of indicators with other countries.