FISCAL COMPOSITION AND ECONOMIC GROWTH IN CENTRAL AMERICA UNDER GLOBAL ECONOMIC LIBERALIZATION
Journal Title: Journal of Globalization Studies - Year 2010, Vol 1, Issue 2
Abstract
Current globalization trends are expected to impact the economy of the Cen-tral American nations through changes in the composition of fiscal budgets. This paper investigates the impact of changes in the composition of public revenues and expenditures on economic growth in Central America during 1970–2000. The analysis is based on fixed effects growth models estimated using the two-stage generalized method of moments in order to correct for potential endogeneity of fiscal variables. Results indicate that reorienting public expenditures in response to global economic change toward capital expenditures may have a positive impact on economic growth. Findings also suggest that economic growth may be depressed if direct taxes are increased to finance public expenditures and compensate for declines in other revenue sources such as expected custom revenue losses due to regional integration and trade liberalization.
Authors and Affiliations
William F. Vásquez
Keywords
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