fiscal policy in latin america and the european union carlos vegh johns hopkins (sais) and brookings...
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![Page 1: Fiscal Policy in Latin America and the European Union Carlos Vegh Johns Hopkins (SAIS) and Brookings Guillermo Vuletin Brookings Brookings Institution,](https://reader035.vdocuments.site/reader035/viewer/2022081515/56649f065503460f94c1c838/html5/thumbnails/1.jpg)
Fiscal Policy in Latin America and the European Union
Carlos Vegh Johns Hopkins (SAIS) and Brookings
Guillermo VuletinBrookings
Brookings Institution, October 8, 2013
![Page 2: Fiscal Policy in Latin America and the European Union Carlos Vegh Johns Hopkins (SAIS) and Brookings Guillermo Vuletin Brookings Brookings Institution,](https://reader035.vdocuments.site/reader035/viewer/2022081515/56649f065503460f94c1c838/html5/thumbnails/2.jpg)
Graduation in developing countries
Before After
-1
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
Co
rre
lati
on
(G
, G
DP
)
Industrial
Developing
-1.2
-1
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
Co
rre
lati
on
(G
, G
DP
)IndustrialDeveloping
![Page 3: Fiscal Policy in Latin America and the European Union Carlos Vegh Johns Hopkins (SAIS) and Brookings Guillermo Vuletin Brookings Brookings Institution,](https://reader035.vdocuments.site/reader035/viewer/2022081515/56649f065503460f94c1c838/html5/thumbnails/3.jpg)
Graduation in Latin American countries
Before (av.=0.30) After (av.=0.17)
Cos
ta R
ica
Chi
le
Bra
zil
Par
agua
y
El S
alva
dor
Arg
entin
a
Ecu
ador
Col
ombi
a
Hon
dura
s
Gua
tem
ala
Nic
arag
ua
Ven
ezue
la
Uru
guay
Mex
ico
Pan
ama
Per
u
Bol
ivia
-1.2
-1
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
Co
rrel
ati
on
(G
, G
DP
)
Col
ombi
a
El S
alva
dor
Pan
ama
Mex
ico
Bra
zil
Bol
ivia
Ecu
ador
Chi
le
Uru
guay
Arg
entin
a
Cos
ta R
ica
Ven
ezue
la
Nic
arag
ua
Gua
tem
ala
Par
agua
y
Per
u
-1
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
Co
rrel
ati
on
(G
, G
DP
)
![Page 4: Fiscal Policy in Latin America and the European Union Carlos Vegh Johns Hopkins (SAIS) and Brookings Guillermo Vuletin Brookings Brookings Institution,](https://reader035.vdocuments.site/reader035/viewer/2022081515/56649f065503460f94c1c838/html5/thumbnails/4.jpg)
Who graduated and who did not
-1
-0.75
-0.5
-0.25
0
0.25
0.5
0.75
1
-1 -0.75 -0.5 -0.25 0 0.25 0.5 0.75 1
Corr(G, GDP) 1960-1999
Co
rr(G
, G
DP
) 2
00
0-2
00
9
Still in school
Recent graduate
Back to school
Established graduate
UK
USA
Venezuela
Greece
Chile
Brazil
Portugal
Spain
Ireland
Italy
Peru
Argentina
Uruguay
![Page 5: Fiscal Policy in Latin America and the European Union Carlos Vegh Johns Hopkins (SAIS) and Brookings Guillermo Vuletin Brookings Brookings Institution,](https://reader035.vdocuments.site/reader035/viewer/2022081515/56649f065503460f94c1c838/html5/thumbnails/5.jpg)
Greece
14
15
16
17
18
19
20
21
22
23
2420
00
:1
200
1:1
200
2:1
200
3:1
200
4:1
200
5:1
200
6:1
200
7:1
200
8:1
200
9:1
201
0:1
201
1:1
201
2:1
201
3:1
VA
T (
tax
rate
)
-10
-5
0
5
10
15
20
GD
P y
G (
cy
clic
al c
om
po
ne
nts
)
VAT (tax rate) GDP (cyclical component) G (cyclical component)
corr(GDP, G) = 0.56
GDP crisis: duration: 19 quarters (ongoing) intensity: -23.5%
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Food for thought
• Many LA governments still fail to save enough in good times … What will happen when the good times end?
• Eurozone countries’ fiscal contraction in bad times: repeating LA’s past mistakes or unavoidable, “market-driven,” adjustment?
• Role of IMF: can lending in bad times be tied to behavior in good times?