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Title: Fiscal sustainability and fiscal shocks in a dollarized and oil-exporting country: Ecuador
Author: Marí del Cristo, María Lorena
Gómez-Puig, Marta
Keywords: Política fiscal
Harmonització fiscal
Indústria petroliera
Producte interior brut
Fiscal policy
Tax harmonization
Petroleum industry and trade
Gross domestic product
Issue Date: 2013
Publisher: Universitat de Barcelona. Institut de Recerca en Economia Aplicada Regional i Pública
Series/Report no: [WP E-IR13/06]
Abstract: This paper investigates the fiscal sustainability of an emerging, dollarized, oil-exporting country: Ecuador. A cointegrated VAR approach is adopted in testing, first, if the intertemporal budget constraint is satisfied in Ecuador and, second, in identifying the permanent and transitory shocks that affect a fiscal policy characterized by inertia and a heavy dependence on oil revenues. Following confirmation that the debt-GDP ratio does not place the Ecuadorian budget under any pressure, we reformulate the model and identify two forces that push the fiscal system out of equilibrium, namely, economic activity and oil revenues implemented in the government budget. We argue that Ecuador needs to recover control of its monetary policy and to promote the diversification of its economy in order that non-oil tax revenues can replace oil revenues as a pushing force. Finally, we calculate quarterly elasticities of tax revenues with respect to Ecuador’s GDP and that of eight Eurozone countries. We illustrate graphically how the Eurozone countries with low positive or high negative elasticities’ levels suffer debt problems after the crisis. This finding emphasizes the pressing need for Ecuador to strengthen the connection between its tax revenues and output, and also suggests that the convergence of these elasticities in the Eurozone might contribute to the success of an eventually future fiscal union.
Note: Reproducció del document publicat a:
It is part of: IREA – Working Papers, 2013, IR13/06
ISSN: 2014-1254
Appears in Collections:Documents de treball (Institut de Recerca en Economia Aplicada Regional i Pública (IREA))

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