The Structural Balance Rule in Chile: Ten Years, Ten Lessons

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Jul 2013
This paper describes the adoption and application of the structural fiscal balance rule in Chile, evaluates its outcomes after the first 10 years, and draws 10 lessons from the experiences that may be useful for the further development of fiscal policy in Chile, as well as for the implementation of a similar rule in other countries. The paper examines the fiscal rule in its conceptual, economic, institutional, and political dimensions, and concludes with a discussion of the future of the fiscal rule in Chile and an examination of some alternatives to improve its performance in an environment marked by the consequences of the 2008-09 international financial crisis, the 2010 earthquake in Chile, and changes in the Chilean government.