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Carlos Gustavo Machicado y Paúl Estrada
Analíti a
k
4
Revista de Análisis Estadístico
Journal of Statistical Analysis
Years
Variable
1
5
10
20
40
80
160
SS
Output
5.3% 6.4% 7.7% 10.0% 13.2% 16.0% 17.1% 17.2%
Consumption
3.1% 4.5% 6.0% 8.7% 12.6% 16.3% 17.7% 17.8%
Priv. Investment
3.5% 7.2% 9.7% 12.4% 13.8% 13.9% 13.8% 13.8%
Pub. Investment
23.5% 23.7% 24.2% 25.4% 27.6% 29.7% 30.6% 30.7%
Welfare
2.9% 4.2% 5.5% 7.8% 10.9% 13.7% 14.7% 14.8%
Years
Sector
1
5
10
20
40
80
160
SS
Hydrocarbons
10.4% 13.5% 16.6% 21.7% 28.5% 34.4% 36.7% 36.9%
Agriculture
2.7% 3.3% 3.9% 4.8% 5.8% 6.7% 7.0% 7.1%
Mining
4.8% 5.6% 6.4% 7.5% 9.0% 10.1% 10.5% 10.6%
Importables
1.8% 2.1% 2.6% 3.8% 5.8% 7.8% 8.5% 8.6%
Non-tradables
7.2% 8.6% 10.2% 13.0% 16.7% 20.0% 21.3% 21.4%
Source: Author’s calculations
Table 8.
Dynamic transition
−
expansive fiscal policy
+
more effective public capital
+
higher TFP.
Table 8 shows that the Bolivian economy can attain high
rates of output and private investment growth over a 5-
year time frame, respectively of 6.4 percent and 7.2 percent.
The economy performs even better in these respects over a
10-year time frame as well and reaches its highest point
with respect to the baseline after 20 years. It is important
to note that a moderate increase in TFP, as per the simu-
lation that followed the PND targets, may have important
medium run effects on growth and welfare. If we want to
increase the short run impact, however, a larger boost in
TFP is needed.
In conclusion, fiscal policy on its own does im-
prove economic performance. Achieving sufficiently good
macroeconomic performance across sectors to substan-
tially impact Bolivia’s trajectory with respect to poverty
will be best achieved together with efficient provision of
public capital and more substantial productivity growth.
23
5 Concluding remarks
Bolivia has experienced a substantial increase in for-
eign revenues due to a substantial commodity boom. This
export boom has allowed the country to reverse chronic
fiscal and external deficits and to accumulate more for-
eign exchange reserves than even before (USD 7.7 billion
in 2008 and USD 8.5 billion in 2009). Average growth rates
of 5.2 percent over the last four years did more for Bolivian
economic growth than the three preceding decades, which
puts the country in an excellent position to reduce poverty.
Government revenue has increased by nearly 20 per-
centage points of GDP over the last four years. Much of
this rise is due to an increase in royalties collected, rena-
tionalization of the industry and the historically high inter-
national oil prices. This unprecedented scenario allowed
the government to push forward fiscal policy via expen-
diture and investment policies and to implement several
transfer programs for poor people.
This study simulated the macroeconomic and sectoral
impacts of various fiscal policy scenarios by building a
five-sector dynamic general equilibrium model for a small
open economy. The economy is inhabited by representa-
tive infinitely-lived agents who face upward-sloping for-
eign capital supply as a reflection of an endogenous coun-
try risk premium. We also include public capital as a pro-
duction factor for private production, allowing us to ana-
lyze the impact of public infrastructure investment on sec-
toral outputs. Public capital is nonrival and we find that it
substantially aids growth and welfare. The model has been
calibrated to match the national account ratios and sectoral
output of the Bolivian economy using 2006 as the base year.
The simulation results for the steady states shows that
the best fiscal policy is a 3.71-percent increase in the value
added tax together with an open economy. This policy al-
lows the economy to grow by 3.41 percent and to maintain
current social transfers to households. We then analyzed
fiscal policies involving increased government spending
and public investment. The results are notable, in that
macroeconomic constraints imply that government expen-
23
In appendix C, we also performed a sensitivity analysis for the relative prices and the valuation of public consumption.
72
Analítika,
Revista de análisis estadístico
, 2 (2012), Vol. 4(2): 57-79