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The economic effects of fiscal policy: The case of Spain

  • de Castro, Francisco
  • Hernández de Cos, Pablo

This paper estimates the effects of exogenous fiscal policy shocks in Spain in a VAR framework. Government expenditure expansionary shocks are found to have positive effects on output in the short-term at the cost of higher inflation and public deficits and lower output in the medium and long term. Tax increases are found to drag economic activity in the medium term while entailing an only temporary improvement of the public budget balance. The application of these results to the analysis of fiscal policy in Spain since the mid-90s points to the conclusion that the consolidation process does not seem to have involved costs in terms of output growth. Moreover, the stance of fiscal policy has become more counter-cyclical in that period.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 30 (2008)
Issue (Month): 3 (September)
Pages: 1005-1028

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Handle: RePEc:eee:jmacro:v:30:y:2008:i:3:p:1005-1028
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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  1. Bouthevillain, C. & Van Den Dool, G. & Langenus, G. & Mohr, M. & Momigliano, S. & Tujula, M. & De Cos, P.H. & Cour-Thimann, Philippine, 2001. "Cyclically Adjusted Budget Balances: an Alternative Approach," Papers 77, Quebec a Montreal - Recherche en gestion.
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  9. Marcellino, Massimiliano, 2002. "Some Stylized Facts on Non-Systematic Fiscal Policy in the Euro Area," CEPR Discussion Papers 3635, C.E.P.R. Discussion Papers.
  10. Carlo A. Favero, . "How do European monetary and fiscal authorities behave?," Working Papers 214, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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  12. Francisco de Castro, 2006. "The macroeconomic effects of fiscal policy in Spain," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 913-924.
  13. jerome henry & sandro momigliano & pablo hernandez de cos, 2005. "The short-term impact of government budgets on prices Evidence from macroeconometric models," Macroeconomics 0501020, EconWPA.
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