Unveiling the Truth: How Sticking to Fiscal Rules Boosts Investment in Latin America

Marta Ruiz-Arranz - Oscar Valencia - David Herrera - Carolina Ulloa Suárez Leave a Comment

There is a widespread belief that fiscal rules hinder public investment. The reasoning is straightforward: to adhere to these rules, governments often must reduce spending, particularly on infrastructure projects, which are not deemed essential in the short term.

But is that really the case? New evidence from Europe, emerging markets and Latin America shows otherwise. Governments that comply with fiscal rules end up enabling more investment. This discovery holds significant implications for Latin America and the Caribbean (LAC), where many countries often disregard fiscal rules during economic downturns or stress.

https://blogs.iadb.org/gestion-fiscal/en/sticking-to-fiscal-rules-boosts-investment-latin-america/