Interpreting budget deficits in Latin America: the methods with application to Argentina

Fiscal policy in Latin American countries is too often evaluatedon the basis of raw deficit figures. This study demonstrateshow the effects of inflation on the deficit must be removedin order to derive the discretionary component of fiscal policy.Once this correction is made, fiscal policy can be evaluatedby testing the movement of the deficit with respect to alternativepolicy targets. As an illustration I employ Argentine data inorder to decompose the deficit and determine the degree to whichit is a reflection of budget endogeneity versus populism/socialconflict.     

Leadership and the aggregation of international collective action

Political entrepreneurs, or leaders, play an important rolein overcoming under-provision and coordination problems inherentin international public goods. Recent examples include the MontrealProtocol on ozone depletion and NATO peacekeeping. We demonstratethat the Prisoner's Dilemma need not be a fait accompli of internationalcollective action, owing to the various means for aggregatingcontributions (summation, best shot, better shot, weakest linkand weaker link). Using evolutionary game theory, we examine'leading by example', whereby a leader unilaterally providesan intermediate contribution, and matching behavior there beyond.It is shown to be a noncooperative means for achieving cooperativeprovision.