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In Search of Countercyclical Financing for Safety Nets

FOR PROTECTION AND PROMOTION THE DESIGN AND IMPLEMENTATION OF EFFECTIVE SAFETY NETS [Pg.56]

Pressures on governments to spend revenues as they are collected have hampered the accumulation of fiscal savings to be used in the case of need. A typical example is the procyclical accumulation of oil revenues (Alesina and Tabellini 2005 Davis, Ossowsky, and Fedelino 2003). The tendency is general, but pertains fully in the case of safety nets. [Pg.56]

Countries experiences show that unless important preconditions in term of fiscal transparency, budget accounts, political consensus, and enforcement mechanisms are met, fiscal responsibility legislation in itself is insufficient to ensure that fiscal policy is sound. Also, fiscal rules tend to be less effective if they only cover the central government, are too specific, and do not foster a reallocation of government spending among programs. [Pg.57]

Countries that have successful fiscal rules include Brazil, where the law has fostered the credibility of the government s policies, and Chile, where fiscal rules had a role in protecting social spending in 2004. Automatic stabilizers tend to be most effective in industrial countries. Failures of fiscal rules in Argentina and elsewhere in Latin America are among the factors that contributed to macroeconomic instability (Singh and others 2005). An example of a fiscal rule that has not been fully enforced is the European Union s Stability and Growth Pact. [Pg.57]


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