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Public Deficits in USMCA Economies During the COVID-19 Economic Crisis
This paper aims to evaluate the fiscal policy implemented by the USMCA economies to deal with the COVID-19 economic crisis. We estimate the economic capacity (potential output) and the Cyclical Primary Balance as a percentage of GDP (CPB) of each of the scrutinized economies. Then we obtain the Cyclical Adjusted Primary Balance as a percentage of GDP (CAPB) as the difference between the Primary Balance (PB) and the CPB. Unlike previous CPB estimations, we obtain the potential output reference as the Economic Capacity methodology (Shaikh and Moudud, 2004), which overcome some alternative methodologies problems. According to our empirical analysis, an asymmetric fiscal policy stands across USMCA economies. Canada and the United States are using a countercyclical fiscal policy, while Mexico uses a procyclical one. Mexico should abandon its current fiscal policy, implement an alternative to support households and firms during crisis periods, and execute a progressive fiscal reform. Our paper's limitation is that we use PB and not its components to estimate the CPB; however, we use a more extended time series, contributing to obtaining more robust results.DĂ©ficits pĂşblicos de los paĂses del T-MEC durante la crisis econĂłmica por COVID-19Nuestro objetivo es evaluar la polĂtica fiscal implementada por las economĂas del T-MEC para enfrentar la crisis del COVID-19. Estimamos la capacidad econĂłmica (producto potencial) y el Balance Primario CĂclico como porcentaje del PIB (CPB) de estas economĂas. Obtenemos el Balance Primario Ajustado por el Ciclo como porcentaje del PIB (CAPB) como la diferencia entre el Balance Primario (PB) y el CPB. A diferencia de estimaciones previas del CPB, el producto potencial se obtiene mediante la metodologĂa de la Capacidad EconĂłmica (Shaikh y Moudud, 2004), que resuelve problemas asociados con metodologĂas alternativas. Nuestro análisis empĂrico muestra que existe una asimetrĂa: en Canadá y Estados Unidos la polĂtica fiscal es anticĂclica y en MĂ©xico es procĂclica. MĂ©xico deberĂa abandonar su polĂtica fiscal actual; implementar una alternativa de apoyo a los hogares y empresas durante los perĂodos de crisis y ejecutar una reforma fiscal progresiva. Una limitaciĂłn de nuestro artĂculo es que usamos PB y no sus componentes para estimar el CPB; sin embargo, utilizamos series de tiempo más largas, lo que contribuye a obtener resultados más robustos