## Chile’s Structural Fiscal Surplus Rule: A Model-Based Evaluation

_IMF Working Papers, April 1, 2009_

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## Bibliographic details
- Authors: Michael Kumhof, Douglas Laxton
- Published: April 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451872354.001

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### Methodology
- Uses a version of the IMF's Global Integrated Monetary and Fiscal Model (GIMF) that includes a copper sector.
- Focuses on copper price shocks originating in foreign copper demand.
- Evaluates Chile's structural balance fiscal rule under alternative policymaker preferences and fiscal targets.

### Key findings
- Chile's current fiscal rule performs well if the policymaker puts a small weight on output volatility (relative to inflation volatility) in his/her objective function.
- A more aggressive countercyclical fiscal rule can attain lower output volatility, but:
  - It leads to somewhat higher inflation volatility.
  - It causes much higher volatility of fiscal variables.
- Given Chile's current stock of government assets, adoption of a 0.5% surplus target starting in 2008 is desirable from a business cycle perspective.
  - The earlier 1% target would have required significant further asset accumulation that could only have been accomplished at the expense of greater volatility in fiscal instruments and therefore in GDP.

### Policy implications and trade-offs
- Weighting in the policymaker’s objective function matters: prioritizing lower output volatility (relative to inflation) favors more countercyclical fiscal policy but increases volatility elsewhere.
- Fiscal targets should consider the existing stock of government assets; tighter surplus targets (e.g., 1%) imply larger asset accumulation and higher volatility in fiscal instruments and GDP compared with a 0.5% target.

### Publication and metadata
- Authors: Michael Kumhof, Douglas Laxton
- Date: April 1, 2009
- Series: Working Paper No. 2009/088
- Pages: 54
- Issue: 088
- DOI: https://doi.org/10.5089/9781451872354.001
- ISBN: 9781451872354
- ISSN: 1018-5941

*Michael Kumhof, and Douglas Laxton. "Chile’s Structural Fiscal Surplus Rule: A Model-Based Evaluation", IMF Working Papers 2009, 088 (2009), accessed 9/2/2026, https://doi.org/10.5089/9781451872354.001.*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/chiles-structural-fiscal-surplus-rule-a-model-based-evaluation-22807_