The macroeconomic effects of fiscal policy in Spain

Francisco de Castro Fernández ()

Applied Economics, 2006, vol. 38, issue 8, 913-924

Abstract: This paper focuses on the effects of fiscal policy in Spain analysed in a VAR context. Fiscal shocks are found to involve significant effects on GDP, private consumption, private investment, interest rates and prices. Non-Keynesian effects are observed. Moreover, evidence on the channels highlighted in the literature for such effects to arise is found, notably the effects of permanent income on consumption and investment on the demand side, coupled with the response of the equilibrium wage on the supply side affecting entrepreneurial profits and investment. The response of interest rates seems to reinforce both effects. Furthermore, the different readings of spending or taxes do not affect macroeconomic variables homogeneously.

Date: 2006
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DOI: 10.1080/00036840500369225

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