Macrofiscal Rules: a simulation exercise for the ecuadorian case based on medium-term programming

Abstract

Ecuador, after dollarization, does not have the possibility of issuing money primarily, thus being fiscal management a key tool of economic policy to stabilize the economy and, in practice, it should not be an instrument that complicates the development of the economy. Despite this, in recent years, the country has generated an accumulation of fiscal deficits and therefore an increase in public debt, which puts the sustainability of public accounts at risk.
Empirical evidence has argued the importance of having macrofiscal rules that allow a return to sustainable fiscal frameworks. In this context, the reforms of the Organic Code of Planning and Public Finances and their respective regulations (2020) included a section referring to fiscal rules. The current document examines the Ecuadorian case and applies a simulation exercise of the computable spending rule of the Central Government for the year 2022 and the link between spending at the Non-Financial Public Sector level and the debt goal for the period 2022- 2025. With the results found, the methodological establishment is recommended from the issuance of technical regulations for the calculation of fiscal rules by the fiscal authority officially.