Economic Cycles, Policies, and Fiscal Rules

This article examines the relationship between fiscal policy in Peru and economic fluctuations during the period 1968–1998, highlighting its procyclical nature, which, far from stabilizing the economy, has intensified these fluctuations. It reveals that Peruvian fiscal policy has exhibited marked volatility—greater than that of developed economies—which in turn has increased macroeconomic uncertainty, discouraging investment and economic growth. The study proposes the implementation of a cyclically balanced budget rule as a solution to mitigate the negative effects of fiscal policy. An empirical analysis is conducted using fiscal statistics and correlations with gross domestic product (GDP), which confirm this procyclicality. In addition, the implications of this situation are discussed, suggesting that the adoption of fiscal rules could contribute to greater stability and predictability in the Peruvian economy. The study concludes that, although the events of the 1990s led to certain fiscal constraints, it is crucial to implement mechanisms that ensure more countercyclical fiscal management. (Abstract and audio: Department of Economic Publications)