Política fiscal subnacional : diagnóstico ante los ciclos económicos municipales 2000-2016

Abstract

Fiscal policy is established as a stabilizing instrument against the volatility of economic activity, a function that becomes more important considering the decentralization model that governs Colombia and many countries, and which is characterized by the fact that subnational governments have fiscal autonomy, and therefore are active agents in the provision of goods and services under a framework of fiscal sustainability that in turn is consistent with economic dynamics. In this scenario, the literature highlights the benefits of a countercyclical fiscal policy that counteracts the volatility of the economy, that is, in a period of boom spending should be reduced and the level of own sources increased, in periods of recession spending should grow while reducing the level of own sources.

Under this scenario, the document seeks to assess whether fiscal policy in Colombia at the subnational level, specifically municipalities, responds countercyclicality to the dynamics of local economic activity. For this, a panel data model was built for 603 municipalities for the period 2000 to 2016, finding a trend towards a procyclical fiscal policy (accentuating the cycle) and showing differences in separating the sample between municipalities with high and low income.