Three essays on fiscal volatility

Part 1. Inflation differentials and fiscal transfers variability. This research contributes to the understanding of inflation differentials across countries. Indeed, inflationary gaps such as those observed between Latin American countries and OECD countries cannot be fully explained by existing theories. In this paper, I examine how the variability of fiscal aggregates (net fiscal transfer) may affect the level of inflation. Using a two-period general equilibrium model, I show the existence of a convex relationship between the rate of inflation and fiscal net transfers. In the presence of uncertainty on the level of fiscal transfers, a higher variance (volatility) of fiscal transfers implies a higher rate of inflation. This relationship holds when money supply and government preferences are introduced into the model. Empirical tests based on data for Latin American and Industrialized countries show support for this result.;Part 2. "Determinants of fiscal volatility: An empirical investigation of Latin American and industrialized countries". This paper is an empirical investigation of sources of fiscal variability. It extends Gavin and Perotti (1997) by introducing a larger set of variables to explain the volatility of fiscal aggregates. The analysis is based on three sets of regressions. In the first one, I investigate the effects on fiscal volatility of domestic financial depth, the structure of fiscal revenues and the economies access to the international credit market. In the second set of regressions, I examine in more detail the importance of automatic fiscal adjustments for fiscal volatility. The objective is to evidence the structure of fiscal revenues and expenditures as sources of volatility. In the last set of regressions, I investigate the relationship between fiscal volatility and institutional and political variables.