On Graduation from Fiscal Procyclicality: The case of Bolivia

Abstract

Since Frankel et al. (2013), many authors have sought evidence of the so-called graduation from fiscal procyclicality; this concept refers to the direction change experienced by a number of developing countries regarding the implementation of destabilizing procyclical policies in the past. While the cyclicality of fiscal policy in Bolivia has been evaluated by multiple authors, we believe that our contribution is relevant because it models the response of fiscal policy in a much more intuitive way, that is also less prone to some specification problems frequently cited in the literature