Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/336297 
Year of Publication: 
2020
Citation: 
[Journal:] Latin American Journal of Central Banking (LAJCB) [ISSN:] 2666-1438 [Volume:] 1 [Issue:] 1/4 [Article No.:] 100006 [Year:] 2020 [Pages:] 1-10
Publisher: 
Elsevier, Amsterdam
Abstract: 
This paper provides evidence on the debt limits and fiscal space for some Latin American emerging economies under the fiscal fatigue approach (Ghosh et al., 2013). We propose the spline technique to estimate each government's reaction function and the sovereign risk premium endogenous to the country's indebtedness. Estimates were made with an unbalanced panel of 13 economies-six from Latin America-for the period 1980-2018. The results vary importantly across the countries. They suggest, for instance, that the Colombian public debt limit would be close to 68% of GDP and that the fiscal space-the gap between the current debt level and the estimated debt limit-would reach 16 percentage points. Among the other Latin American economies, Peru and Chile have the largest fiscal space (50% and 39%, respectively), while Ecuador has the lowest (13%). The findings for Mexico look like those of Colombia.
Subjects: 
Debt
Fiscal policy
Primary balance
Sustainability
JEL: 
E27
E44
E61
E62
H62
H63
H68
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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