How Far Should Fiscal Self-Flagellation Go?

Abstract

Few today dare to deny that the structural fiscal balance rule is a pillar of Chile's economic strength. But how strict must we be in order to sustain it? What is the ideal level of fiscal surplus we should attain? In any economics course, a student learns that there are costs associated with every action. One will undertake it if the benefits exceed the costs. How intense one should be is determined by the point at which costs and benefits are equal at the margin. Continue reading...