Co-authors: Bernardo Lara, Andrea Repetto
Affiliation: Universidad Adolfo Ibáñez
Date and time:  Wednesday, July 8, 2026 14:30 (Santiago, GMT-04:00)
Location (Hybrid Seminar):

• Auditorio at the Central Bank of Chile, Morandé 115, second floor.
• Online meeting

Registration: seminarios@bcentral.cl

Abstract: We estimate municipal-level fiscal multipliers in Chile by exploiting exogenous variation in transfers from the Fondo Común Municipal (FCM), an equalization mechanism that redistributes revenues across Chile's 345 municipalities. Identification relies on a discontinuity in the FCM allocation formula. Using administrative data from SUBDERE, SII, and the Central Bank of Chile covering the period 2011–2024, we find that a one-peso increase in local public spending raises local demand (total purchases) by approximately $1.43, with $0.19 accruing within the municipality and $1.12 spilling over to other localities. We find effects on the hiring of independent contractors, the number of firms active within the municipality, and credit, but no effect on formal employment. We do not find evidence of price effects. Importantly, our results indicate that municipalities do not significantly adjust their own revenue strategies in response to the FCM transfer shock. These results contribute to the evidence on local fiscal multipliers from a small, open, middle-income economy, complementing the existing literature concentrated in advanced economies.