The Macroeconomic Effects of Fiscal Policy in Portugal: a Bayesian SVAR Analysis

Antonio Afonso and Ricardo Sousa

No 2009/09, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: In the last twenty years Portugal struggled to keep public finances under control, notably in containing primary spending. We use a new quarterly dataset covering 1979:1-2007:4, and estimate a Bayesian Structural Autoregression model to analyze the macroeconomic effects of fiscal policy. The results show that positive government spending shocks, in general, have a negative effect on real GDP; lead to important “crowding-out” effects, by impacting negatively on private consumption and investment; and have a persistent and positive effect on the price level and the average cost of financing government debt. Positive government revenue shocks tend to have a negative impact on GDP; and lead to a fall in the price level. The evidence also shows the importance of explicitly considering the government debt dynamics in the model. Finally, a VAR counter-factual exercise confirms that unexpected positive government spending shocks lead to important “crowding-out” effects..

Keywords: B-SVAR; fiscal policy; debt dynamics; Portugal. (search for similar items in EconPapers)
JEL-codes: E37 E62 G10 H62 (search for similar items in EconPapers)
Date: 2009-03
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

Downloads: (external link)
http://pascal.iseg.utl.pt/~depeco/wp/wp092009.pdf (application/pdf)

Related works:
Journal Article: The macroeconomic effects of fiscal policy in Portugal: a Bayesian SVAR analysis (2011)
Working Paper: The Macroeconomic Effects of Fiscal Policy in Portugal: a Bayesian SVAR Analysis (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ise:isegwp:wp92009

Access Statistics for this paper

More papers in Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa Department of Economics, ISEG - Lisbon School of Economics and Management, Universidade de Lisboa, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL.
Bibliographic data for series maintained by Vitor Escaria (vescaria@iseg.ulisboa.pt).