When do governments improve fiscal institutions? Lessons from financial crisis and fiscal reform in Latin America

Hallerberg, Mark and Scartascini, Carlos (2015) When do governments improve fiscal institutions? Lessons from financial crisis and fiscal reform in Latin America. Economía, 16 (1). 41 - 76. ISSN 1529-7470

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Abstract

Do crises really lead to more institutional reforms? This paper explores the connection between financial crises and one type of reform frequently advocated during the recent global financial crisis, namely, fiscal institutional reforms. Some authors expect that crises lead to reforms, but we demonstrate that the relationship is not so straightforward. Using a data set of Latin American countries that experienced several crises and also several periods of reform in the period from 1990 to 2005, we find that the type of crisis and its duration matter. We argue that reforms are less likely during a banking crisis, whereas fiscal crises are most likely to lead to fiscal reforms. This means that the type of economic crisis is important for explaining the likelihood of reforms. We explore other possible explanations for reform, such as the partisanship of the president and whether a country is under an IMF program, and do not find confirming evidence for alternative explanations. JEL Classification: D72, H12, H62, H63.

Item Type:	Article
Official URL:	https://economia.lse.ac.uk/
Additional Information:	© 2015 LACTEA
Divisions:	LSE
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HJ Public Finance
JEL classification:	D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Economic Models of Political Processes: Rent-Seeking, Elections, Legislatures, and Voting Behavior H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt; Debt Management H - Public Economics > H6 - National Budget, Deficit, and Debt > H62 - Deficit; Surplus
Date Deposited:	09 Jul 2024 14:54
Last Modified:	14 Sep 2024 10:00
URI:	http://eprints.lse.ac.uk/id/eprint/123051

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