In order to enhance fiscal sustainability and regain “investment grade” credit rating, in 2011 Colombia implemented a fiscal rule (FR) on the Central Government's structural balance. Investment grade was rapidly attained, and FR targets were complied with, until 2019. Using the Synthetic...

This paper assesses debt sustainability in Guatemala. Debt stability has been achieved at very low expenditure levels, at the expense of adequate provisioning of public goods and services and a widening gap in social development and infrastructure. Since fiscal outcomes are not independent from...

Spending elasticities measure the reaction of different government spending components to the business cycle. They are important inputs for fiscal forecasts, and they are particularly relevant in the context of European Union (EU) fiscal rules, as elasticity estimates enter the estimation of...

Fiscal rules have gained popularity as tools to strengthen debt sustainability by constraining policy discretion. However, their track record in the case of emerging markets is mixed, as setting up a fiscal rule has been no guarantee of debt stabilization. International experience and empirical...

Societies often rely on simple rules to restrict the size and behavior of governments. When fiscal and monetary policies are conducted by a discretionary and profligate government, I find that revenue ceilings vastly outperform debt, deficit and monetary rules, both in effectiveness at curbing...

Total public debt in most emerging markets grew before and after the pandemic with a sizable share in foreign currency. Along this trend, interest payments increased even in the presence of active fiscal rules in some countries. How should debt management of public debt be set under a fiscal...

Do voters punish governments that introduce fiscal "austerity" measures? If so, does voter response vary according to the design (composition) of fiscal adjustments? What determines the timing of fiscal consolidations? The empirical literature on the political economy of fiscal adjustments,...

During the pandemic, public debt in Latin America and the Caribbean rose to more than 70 percent of GDP, and countries are now attempting to lower debt ratios. We analyze past debt reduction episodes and find inflation and the real interest rate were the most frequent main drivers, while higher...