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The macroeconomic effects of legislated tax changes in Portugal

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This paper develops a new measure of quarterly discretionary tax shocks for Portugal that covers the period from 1996 to 2012 and was based on the so-called narrative approach. The main distinctive feature of this approach is that tax shocks are dated and quantified on the basis of a comprehensive analysis of tax policy measures, and not by econometric estimations. The findings point to strongly negative and persistent effects of legislated tax increases on GDP and private consumption, in line with narrative studies for other countries that yielded comparatively high tax multipliers.
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Output Effects of a Measure of Tax Shocks Based on Changes in Legislation for Portugal