The macroeconomic effects of fiscal policy in Portugal: a Bayesian SVAR analysis |
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| Authors: | Ant??nio Afonso Ricardo M Sousa |
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| Institution: | (1) European Central Bank, Directorate General Economics, Kaiserstra?e 29, 60311 Frankfurt am Main, Germany;(2) Department of Economics; UECE—Research Unit on Complexity and Economics, ISEG/TULisbon—Technical University of Lisbon, R. Miguel Lupi 20, 1249-078 Lisbon, Portugal;(3) Department of Economics and Economic Policies Research Unit (NIPE), University of Minho, Campus of Gualtar, 4710-057 Braga, Portugal;(4) London School of Economics, Financial Markets Group (FMG), Houghton Street, London, WC2 2AE, UK |
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| Abstract: | 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. |
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