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Assessing Long-Term Fiscal Developments: Evidence from Portugal

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Author Info
Ricardo M. Sousa () (Universidade do Minho - NIPE)
António Afonso () (European Central Bank, Directorate General Economics)

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Abstract

Drawing on quarterly data for Portugal, we use a Three-Stage Least Square method and a system of equations to recursively estimate two components of fiscal policy - responsiveness and persistence - and to infer about the sources of fiscal deterioration (improvement). The results suggest that: (i) government spending exhibits higher persistence than government revenue; and (ii) government revenue is more responsive to the business cycle than government spending.

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Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 1/2009.

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Date of creation: 2009
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Handle: RePEc:nip:nipewp:1/2009

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Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal
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Related research
Keywords: Fiscal deterioration; Portugal.;

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Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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  1. MacDonald, Ronald, 1992. "Some Tests of the Government's Intertemporal Budget Constraint Using U.S. Data," Applied Economics, Taylor and Francis Journals, vol. 24(12), pages 1287-92, December.
  2. Bohn, Henning, 2007. "Are stationarity and cointegration restrictions really necessary for the intertemporal budget constraint?," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1837-1847, October. [Downloadable!] (restricted)
  3. Antonio Fatás & Ilian Mihov, 2003. "The Case For Restricting Fiscal Policy Discretion," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1419-1447, November. [Downloadable!] (restricted)
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  4. Ahmed, Shaghil & Rogers, John H., 1995. "Government budget deficits and trade deficits Are present value constraints satisfied in long-term data?," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 351-374, November. [Downloadable!] (restricted)
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  5. Baglioni, Angelo & Cherubini, Umberto, 1993. "Intertemporal Budget Constraint and Public Debt Sustainability: The Case of Italy," Applied Economics, Taylor and Francis Journals, vol. 25(2), pages 275-83, February.
  6. António Afonso & Luca Agnello & Davide Furceri & Ricardo M. Sousa, 2009. "Assessing Long-Term Fiscal Developments: a New Approach," NIPE Working Papers 7/2009, NIPE - Universidade do Minho. [Downloadable!]
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  7. António Afonso & Luca Agnello & Davide Furceri, 2008. "Fiscal policy responsiveness, persistence and discretion," Working Paper Series 954, European Central Bank. [Downloadable!]
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  8. Hamilton, James D & Flavin, Marjorie A, 1986. "On the Limitations of Government Borrowing: A Framework for EmpiricalTesting," American Economic Review, American Economic Association, vol. 76(4), pages 808-19, September. [Downloadable!] (restricted)
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  9. António Afonso, 2005. "Fiscal Sustainability: The Unpleasant European Case," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(1), pages 19-, March.
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  10. Trehan, Bharat & Walsh, Carl E, 1991. "Testing Intertemporal Budget Constraints: Theory and Applications to U.S. Federal Budget and Current Account Deficits," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 206-23, May. [Downloadable!] (restricted)
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  11. António Afonso & Ricardo M. Sousa, 2009. "The macroeconomic effects of fiscal policy," Working Paper Series 991, European Central Bank. [Downloadable!]
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  12. António Afonso & Christophe Rault, 2008. "What do we really Know about Fiscal Sustainability in the EU? A Panel Data Diagnostic," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  13. Smith, Gregor W & Zin, Stanley E, 1991. "Persistent Deficits and the Market Value of Government Debt," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(1), pages 31-44, Jan.-Marc. [Downloadable!] (restricted)
  14. Quintos, Carmela E, 1995. "Sustainability of the Deficit Process with Structural Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 409-17, October.
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