A Balancing Act : Reform Options for Paraguay’s Fiscal Responsibility Law
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Summary:
Paraguay faces a trade-off between building fiscal credibility and amending the existing fiscal rule to accommodate infrastructure investment and provide space for countercyclical policies. In this paper, we discuss several alternative fiscal rules for Paraguay and present simulations of debt trajectories in each case, assuming a baseline and three deterministic shock scenarios. We provide a supplementary Excel file to replicate debt simulations under different fiscal rules. The results suggest that potential modifications to make the fiscal rules more flexible in Paraguay should be accompanied by a number of safeguards that enhance credibility of the fiscal anchor and preserve sustainability.
Series:
Working Paper No. 16/226
Subject:
Fiscal policy Fiscal responsibility law Fiscal rules Paraguay
English
Publication Date:
November 16, 2016
ISBN/ISSN:
9781475555158/1018-5941
Stock No:
WPIEA2016226
Format:
Paper
Pages:
33
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