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Long-term effects of fiscal policies in Portugal

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Author Info

  • Alfredo Marvão Pereira

Abstract

Purpose – 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 Info

Article provided by Emerald Group Publishing in its journal Journal of Economic Studies.

Volume (Year): 38 (2011)
Issue (Month): 1 (January)
Pages: 114-127

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Handle: RePEc:eme:jespps:v:38:y:2011:i:1:p:114-127

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Related research

Keywords: Budgetary control; Fiscal policy; Portugal;

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Cited by:
  1. 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.

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