Fiscal Rules and Economic Size in Latin America and the Caribbean

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This book provides analytical contributions to the design of fiscal rules in small economies in the Latin America and the Caribbean region. These economies usually face high levels of output volatility, large terms-of-trade shocks, and exposure to natural disasters. The relationship between fiscal rules and economic size has not been systematically assessed in the literature. Determining which fiscal rules are most appropriate for smaller economies can contribute toward improving their design and effectiveness. The study reviews the performance of fiscal rules worldwide and provides information on which rule types are most common, which have the best record for compliance, and which features tend to improve their performance. It provides practical policy directions drawn from international experience to assist policymakers of smaller economies in designing and implementing more effective fiscal rules.