Fiscal Policy and Macroeconomic Uncertainty in Developing Countries : The Tale of the Tormented Insurer

@inproceedings{Mendoza2006FiscalPA,
  title={Fiscal Policy and Macroeconomic Uncertainty in Developing Countries : The Tale of the Tormented Insurer},
  author={Enrique G. Mendoza and P. Marcelo Oviedo},
  year={2006}
}
Governments in emerging markets often behave like a “tormented insurer”, trying to use non-state-contingent debt instruments to avoid cuts in payments to private agents despite large fluctuations in public revenues. In the data, average public debt-GDP ratios decline as the variability of revenues increases, primary balances and current expenditures follow cyclical patterns sharply at odds with the countercyclical patterns of industrial countries, and the cyclical variability of public… CONTINUE READING
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