Assessing the macroeconomic effects of fiscal policy in Colombia
Purpose – The purpose of this paper is to study the short-term macroeconomic effects of the fiscal policy in Colombia for the 1980-2007 period using a structural vector autoregression (SVAR) model. Design/methodology/approach – The authors' benchmark is a five-variable SVAR model which includes government spending, output, tax revenues, inflation and short-term interest rates. In addition, the authors specified six-variable VAR models, adding in turn private consumption, private investment, the unemployment rate and the real minimum wage to the last set of variables. Two alternative identification techniques are used in the VARs to check the robustness of the results. Findings – The following effects of a positive government spending shock are found. First, the GDP responds positively and significantly during the first six quarters. The cumulative output multiplier fluctuates between 1.12 and 1.19. Second, both inflation and nominal interest rates respond positively and significantly. Third, the authors find a significant positive response by both private consumption and private investment. Finally, the unemployment rate reacts negatively and significantly. Research limitations/implications – The most surprising result comes from the response of output to a positive shock in taxes. Nonetheless, the positive respond of the GDP is short lived and has little significance. Practical implications – The authors' results support the smoothing role of fiscal policy on output fluctuations, which implies its capacity to restore real activity effectively in critical times like the ones currently being forecast. Originality/value – The negligible results found previously for Colombia could be related to the fiscal data used, which are not keep coherence with national accounting. To solve these obstacles, a quarterly fiscal database is assembled on an approximately accrual basis for the general government.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 3 (2011)
Issue (Month): 3 (August)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://www.emeraldinsight.com/jfep.htm Email:
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jorge E. Restrepo & Hernán Rincón, 2006.
"Identifying Fiscal Policy Shocks In Chile And Colombia,"
BORRADORES DE ECONOMIA
002800, BANCO DE LA REPÚBLICA.
- Jorge E. Restrepo & Hernán Rincón, . "Identifying Fiscal Policy Shocks In Chile And Colombia," Borradores de Economia 397, Banco de la Republica de Colombia.
- Jorge E. Restrepo & Hernán Rincón, 2006. "Identifying Fiscal Policy Shocks in Chile and Colombia," Working Papers Central Bank of Chile 370, Central Bank of Chile.
- Ignacio Lozano & Jorge Toro, 2007.
"Fiscal Policy Throughout The Business Cycle: The Colombian Experience,"
Ensayos sobre Política Económica,
Banco de la Republica de Colombia, vol. 25(55), pages 12-39, Diciembre.
- Ignacio Lozano & Jorge Toro, 2007. "Fiscal Policy Throughout The Business Cycle: The Colombian Experience," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 25(55), pages 12-39, December.
- Baxter, Marianne & King, Robert G, 1993.
"Fiscal Policy in General Equilibrium,"
American Economic Review,
American Economic Association, vol. 83(3), pages 315-34, June.
- Pappa, Evi, 2005.
"New-Keynesian or RBC Transmission? The Effects of Fiscal Shocks in Labour Markets,"
CEPR Discussion Papers
5313, C.E.P.R. Discussion Papers.
- Evi Pappa, 2005. "New-keynesian or RBC transmission? The effects of fiscal shocks in labour markets," LSE Research Online Documents on Economics 524, London School of Economics and Political Science, LSE Library.
- Bénédicte Vidaillet & V. D'Estaintot & P. Abécassis, 2005. "Introduction," Post-Print hal-00287137, HAL.
- Francisco de Castro, 2003.
"The macroeconomic effects of fiscal policy in Spain,"
0311, Banco de España;Working Papers Homepage.
- Francisco de Castro, 2006. "The macroeconomic effects of fiscal policy in Spain," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 913-924.
- Wolff, Guntram B. & Tenhofen, Jörn & Heppke-Falk, Kirsten H., 2006.
"The macroeconomic effects of exogenous fiscal policy shocks in Germany: a disaggregated SVAR analysis,"
Discussion Paper Series 1: Economic Studies
2006,41, Deutsche Bundesbank, Research Centre.
- Jörn Tenhofen & Guntram B. Wolff & Kirsten H. Heppke-Falk, 2010. "The Macroeconomic Effects of Exogenous Fiscal Policy Shocks in Germany: A Disaggregated SVAR Analysis," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 230(3), pages 328-355, June.
- Enrique G. Mendoza & Assaf Razin & Linda L. Tesar, 1994.
"Effective Tax Rates in Macroeconomics: Cross-Country Estimates of Tax Rates on Factor Incomes and Consumption,"
NBER Working Papers
4864, National Bureau of Economic Research, Inc.
- Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December.
- Olivier Blanchard & Roberto Perotti, 2002.
"An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 117(4), pages 1329-1368.
- Olivier Blanchard & Roberto Perotti, 1999. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," NBER Working Papers 7269, National Bureau of Economic Research, Inc.
- David Aschauer, 1988.
"Is public expenditure productive?,"
88-7, Federal Reserve Bank of Chicago.
- 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.
- Marcellino, Massimiliano, 2006. "Some stylized facts on non-systematic fiscal policy in the Euro area," Journal of Macroeconomics, Elsevier, vol. 28(3), pages 461-479, September.
- Massimiliano Marcellino, . "Some stylized facts on non-systematic fiscal policy in the Euro area," Working Papers 225, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Fatás, Antonio & Mihov, Ilian, 2001. "The Effects of Fiscal Policy on Consumption and Employment: Theory and Evidence," CEPR Discussion Papers 2760, C.E.P.R. Discussion Papers.
- Rodrigo Cerda & Hermann Gonzalez & Luis Felipe Lagos, 2006.
"Is fiscal policy effective? Evidence for an emerging economy: Chile 1833-2000,"
Applied Economics Letters,
Taylor & Francis Journals, vol. 13(9), pages 575-580.
- Rodrigo Cerda & Hermann González & Luis Felipe Lagos, 2005. "Is Fiscal Policy Effective? Evidence for an Emerging Economy: Chile 1833-2000," Documentos de Trabajo 292, Instituto de Economia. Pontificia Universidad Católica de Chile..
- Roberto Perotti, 2008.
"In Search of the Transmission Mechanism of Fiscal Policy,"
in: NBER Macroeconomics Annual 2007, Volume 22, pages 169-226
National Bureau of Economic Research, Inc.
- Roberto Perotti, 2007. "In Search of the Transmission Mechanism of Fiscal Policy," NBER Working Papers 13143, National Bureau of Economic Research, Inc.
- Afonso, António & Ebert, Werner & Schuknecht, Ludger & Thöne, Michael, 2005. "Quality of public finances and growth," Working Paper Series 0438, European Central Bank.
- Ignacio Lozano & Jorge Toro, 2007.
"Fiscal Policy Throughout the Cycle: The Colombian Experience,"
BORRADORES DE ECONOMIA
002730, BANCO DE LA REPÚBLICA.
- Ignacio Lozano & Jorge Toro, . "Fiscal Policy Throughout the Cycle: The Colombian Experience," Borradores de Economia 434, Banco de la Republica de Colombia.
- Caldara, Dario & Kamps, Christophe, 2008. "What are the effects of fiscal policy shocks? A VAR-based comparative analysis," Working Paper Series 0877, European Central Bank.
When requesting a correction, please mention this item's handle: RePEc:eme:jfeppp:v:3:y:2011:i:3:p:206-228. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.