Fiscal policy and private investment. Latin America in a comparative perspective

Vol. 32 No. 2 (2012)

Apr-Jun / 2012
Published April 1, 2012
PDF-English
PDF-English

How to Cite

Caballero U., Emilio, and Julio López G. 2012. “Fiscal Policy and Private Investment. Latin America in a Comparative Perspective”. Brazilian Journal of Political Economy 32 (2):241-59. https://centrodeeconomiapolitica.org/repojs/index.php/journal/article/view/352.

Fiscal policy and private investment. Latin America in a comparative perspective

Emilio Caballero U.
Universidad Nacional Autónoma de Mexico.
Julio López G.
Universidad Nacional Autónoma de Mexico.
Brazilian Journal of Political Economy, Vol. 32 No. 2 (2012), Apr-Jun / 2012, Pages 241-259

Abstract

The main objective of the paper is to assess the impact of fiscal variables on private investment comparing some Latin American economies to other advanced ones. For such purposes, the authors carry out an econometric analysis for the period 1990-2008. They make use of two dynamic panel models in which they group countries with similar characteristics and development levels. In one of them, they include Mexico, Brazil, Chile, Colombia and Uruguay; whereas in the second one the countries accounted for are the U.S., Canada, Spain, Korea, Ireland and Japan. They specify in both models an investment function using as arguments a wide range of variables, including those related with fiscal policy. From their results the authors infer that governments can, with higher spending, boost up the economy even when they finance spending with higher taxes. In Latin America, where income concentration is enormous, a proposal to boost up the economy through higher government expenditure financed with a progressive income tax, is even more justified.

JEL Classification: E1; E6; H6.


Keywords: Latin America fiscal policy macroeconomic model