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107 primary expenditure primary balance

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Unformatted text preview: caled down once countries start recovering, or which could generate future increases in fiscal revenues – e.g. as in the case of growth‐enhancing investments in infrastructure. Second, when designing their fiscal responses to the crisis, most countries are likely to give a large weight to targeting issues, so as to try and protect the region’s achievements in the social front and help the most vulnerable cope with the downturn. In this respect, social safety nets based on means‐tested transfers and workfare programs may be preferable to general increases in public sector wages. Finally, all countries are likely to seriously consider the possible trade‐off between the timeliness of fiscal interventions and their potential effectiveness and efficiency. This may imply, for example, giving priority to avoiding the suspension of ongoing or pre‐appraised projects instead of starting new and un‐ tested public investment projects. 130 We focus on a group of nine countries comprising Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Peru and Venezuela. 131 Appendix 1 describes the motivations for focusing on these factors, as well as the specific indicators used to measure them, and country rankings for each of them. 132 We normalize the six components of the index to scores in the unit interval [0,1]. We do not cover Bolivia because of lack of data on borrowing costs. 133 See Spilimbergo, Symansky, Blanchard and Cotarelli (2008) and Kraay and Serven (2008). 101 References Alesina, A., F. Campante, and G. Tabellini (2008) “Why is fiscal policy often pro‐cyclical?” Journal of the European Economic Association 6(5): 1006‐1036 Braun, M. (2001) “Why is fiscal policy pro‐cyclical in developing countries?” CIPPEC, manuscript Caballero, R., and A. Krishnamurthy (2004) “Fiscal policy and financial depth.” NBER Working Paper 10532, May Calderón, C. and L. Servén, eds. (2004) “Trends in Infrastructure in Latin America, 1980‐2001,” Policy Research Working Paper No. WPS 3401, World Bank, Washington, DC. Debrun, X., J. Pisany‐Ferri, and A. Sapir (2008) “Government size and output volatility: Should we forsake automatic stabilization?” Easterly, W. and L. Servén, eds. (2003) The Limits of Stabilization: Infrastructure, Public Deficits, and Growth in Latin America, Palo Alto: Stanford University Press and World Bank. Fatas, A., and I. Mihov (2001) “Government size and automatic stabilizers.” Journal of International Economics Fatas, A., and I. Mihov (2003) “The case for restricting fiscal policy discretion.” Quarterly Journal of Economics 118(4): 1419‐1447 Fatás, Antonio and Ilian Mihov (2007). “Fiscal Discipline, Volatility and Growth”, in Guillermo Perry, Luis Servén and Rodrigo Suescún (eds.), Fiscal Policy Stabilization and Growth: Prudence or Abstinence? Washington D.C.: The World Bank. Fatas, A., and I. Mihov (2009) “The Euro and fiscal policy.” NBER Working Paper 14722, February Galí, J. (2004)”Government size and macroeconomic stabil...
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