Fiscal Policy and National Saving in Mexico, 1980-2006

This paper uses structural vector autoregressions (SVAR) to characterize the dynamic impact of fiscal policy on national saving. SVAR´s have extensively been used to characterize the impact of monetary policy on the economy but have not been applied as much to analyzing fiscal policy. This paper focuses on the impact of fiscal policy on national saving and the data used is adjusted for inflation and cyclical effects, rather than using traditional estimations by official entities. Our empirical analysis shows that fiscal policy has an important economic impact on national saving, any impact on private saving and a negative but non-significant effect on the output gap.