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Multipliers of taxes and public spending in Colombia: SVAR and local projections approaches

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  • Restrepo-Ángel, Sergio
  • Rincón-Castro, Hernán
  • Ospina-Tejeiro, Juan J.

Abstract

This paper estimates and analyzes multipliers for tax revenue and public spending for Colombia using structural autoregressive vectors and local projections models. Quarterly series of the central national government between 2000Q1 and 2018Q4 are used. The results show fiscal multipliers that are less than unity when the state of the economy is not considered and a spending multiplier around unity when the economy is in an expansionary phase. The spending multiplier is greater and bigger than one during a contractionary phase, supporting the case for conducting countercyclical fiscal policy in this state. The tax revenue multiplier is negative and much smaller in magnitude than the spending multiplier. The results are robust to different identification schemes and estimation methodologies.

Suggested Citation

  • Restrepo-Ángel, Sergio & Rincón-Castro, Hernán & Ospina-Tejeiro, Juan J., 2022. "Multipliers of taxes and public spending in Colombia: SVAR and local projections approaches," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 3(3).
    • Handle: RePEc:eee:lajcba:v:3:y:2022:i:3:s2666143822000242
    DOI: 10.1016/j.latcb.2022.100070
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    More about this item

    Keywords

    Fiscal shocks; Blanchard and Perotti; Standard and smooth local projections; Fiscal multipliers;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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