Structural Fiscal Policy in Uruguay: A Proposal

This paper presents a design and simulation of a structural fiscal policy in Uruguay. The design includes the derivation of a metric for the structural balance that is most adequate for the country and the calculation of a structural fiscal target. This target is associated to a goal for the net worth of the public sector that ensures sustainability of the financial position of the public sector, or at least reduces its historical vulnerabilities. The paper also discusses the current situation in meeting the preconditions for the establishment of a structural fiscal balance target, and makes some recommendations on the policy reforms that appear to be needed to implement a structural fiscal policy in Uruguay.