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date: 04 December 2020

Abstract and Keywords

Focusing on current issues, this chapter discusses four topics that distinguish Latin America from other regions, and discusses the most compelling explanations provided in the analytical literature, starting with the broad topic of fiscal state capacity in Latin America. The second topic is the well-documented pro-cyclical nature of fiscal policy in Latin America. This is a critical issue because fiscal policies should allow countries to achieve macroeconomic stability, rather than exacerbating economic fluctuations. The third topic is fiscal decentralization. Despite very low tax-revenue generation at the subnational level, government expenditures are increasingly decentralized in Latin America. The last section deals with sustainability issues. The main point is that very few countries in the region issue sovereign debt internationally rated as investment grade.

Keywords: fiscal policy, fiscal state capacity, Latin America, macroeconomic stability, fiscal decentralization, investment grade

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