Long-term effects of fiscal policies in Portugal

Alfredo Marvão Pereira, Oriol Roca-Sagalés

Research output: Contribution to journalArticleResearchpeer-review

6 Citations (Scopus)

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. © Emerald Group Publishing Limited.
Original languageEnglish
Pages (from-to)114-127
JournalJournal of Economic Studies
Volume38
Issue number1
DOIs
Publication statusPublished - 1 Jan 2011

Keywords

  • Budgetary control
  • Fiscal policy
  • Portugal

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