The Behaviour of Social Transfers over the Business Cycle: Empirical Evidence of Uruguay

This paper analyses the cyclical fluctuations of public social cash transfers and its components in Uruguay over 1988/Q1 to 2016/Q3. The unobservable cyclical components are extracted from the observable time series using different empirical strategies. The results show that components of public social cash transfers are procyclical and lag the macroeconomics fluctuations. This enables us to say that instead of these cash transfers contributing to stabilizing the Uruguayan economy they have thereby aggravated the business cycle, and through various expenditure items expose the vulnerable groups of society to more adverse economic conditions.