Long-term effects of fiscal policies in Portugal
AbstractPurpose – This paper seeks to estimate the long-term effects on output of different fiscal policies in Portugal. Design/methodology/approach – Results are obtained from accumulated impulse response functions associated with unrestricted VAR models that include several public spending and taxation variables in addition to output. Findings – Empirical results suggest that the effects of fiscal policies are within the Keynesian paradigm for public investment and direct taxation. In turn, non-Keynesian effects dominate in the case of intermediate public consumption and indirect taxation where the effects are negligible. Practical implications – Cuts in public consumption and increases in indirect taxations seem to be the most desirable instruments for fiscal consolidation in Portugal. Also, deficit-neutral policies that offset increases in public investment with increases in indirect taxes have long-term positive effects on output. The same is true for cuts in direct taxation offset with cuts in all forms of public spending except for public investment. Originality/value – This is one of the few papers in this literature to use disaggregated public spending and taxation data. It is also a seminal application to the Portuguese case.
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Bibliographic InfoArticle provided by Emerald Group Publishing in its journal Journal of Economic Studies.
Volume (Year): 38 (2011)
Issue (Month): 1 (January)
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Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
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- Ricardo Silva & Vitor Manuel Carvalho & Ana Paula Ribeiro, 2013. "How large are fiscal multipliers? A panel-data VAR approach for the Euro area," FEP Working Papers 500, Universidade do Porto, Faculdade de Economia do Porto.
- Manuel Coutinho Pereira & Lara Wemans, 2013. "Output effects of fiscal policy in Portugal: a structural VAR approach," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
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