Abstract

GANIKO, Gustavo  and  MONTORO, Carlos. Fiscal Rules for commodity exporters: an application for Peru. Ens. polit. econ. [online]. 2018, vol.36, n.spe85, pp.65-85. ISSN 0120-4483.  https://doi.org/10.32468/espe.8504.

We present a tailor-made semi-structural model, which captures the main macro-fiscal variables in commodity exporting economies, to analyze the macroeconomic effects of 4 fiscal rules: (i) a limit to the observed fiscal deficit; (ii) a limit to the structural deficit; (iii) a limit to the growth rate of government expenditures; and (iv) a rule that includes jointly rules (i) and (iii).

We estimate the model for the Peruvian economy for the 2000-2015 period. We find that the optimal design of a macrofiscal framework con be summarized as a trilemma between fiscal sustainability, macroeconomic stability and transparency. The structural rule, although it depends on the estimation of unobservable variables which could make monitoring difficult, diminishes the volatility of GDP and public expenditures, but increases the volatility of the public debt ratio to GDP. In contrast, the rule base on the observed fiscal deficit is easier to monitor and generates a more stable path of public debt, but increased the volatility of GDP and public expenditures. Finally, the joint rule of a fiscal deficit limit and an expenditure growth limit is an intermediate case between them in terms of macroeconomic volatility.

JEL classification: E62, H62.

Keywords : fiscal rules; fiscal policy; structural fiscal balance; commodities.

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