The macroeconomic effects of fiscal policy in Portugal : a Bayesian SVAR analysis

• Autor(a) principal: Afonso, António
• Data de Publicação: 2011
• Outros Autores: Sousa, Ricardo M.
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.5/15656
• topic: B-SVAR; Fully simultaneous system; Fiscal policy; Debt dynamics; Portugal

With a new quarterly dataset we estimate a Bayesian Structural Autoregression model and a Fully Simultaneous System approach to analyze the macroeconomic effects of fiscal policy. Results show that positive government spending shocks, in general, have a negative effect on real GDP; lead to “crowding-out” effects of private consumption and investment; have a persistent and positive effect on the price level and a mixed impact on the average financing cost of government debt. Explicitly considering the government debt dynamics in the model is also important. A VAR counter- factual exercise confirms that unexpected positive spending shocks create relevant “crowding-out” effects.