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Output effects of fiscal policy in Portugal: a structural VAR approach

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This study applies the structural VAR methodology to the identification of fiscal policy shocks in Portugal, using quarterly general government accounts from 1995 to 2011. Using a more detailed breakdown of variables than is usual, an estimate is made of the impact on economic activity of shocks to taxes, broken down into direct and indirect taxes, transfers, and government consumption, broken down into compensation of employees and expenditure on goods and services. The findings point to the existence of multiplier effects on output with a conventional sign (except for expenditure on goods and services) in the sample period, stronger for compensation of employees and direct taxes than for the remaining variables analysed. At the same time, changes in indirect taxes and, to a lesser degree, in transfers, tend to cause less of an impact on economic activity.
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Journal (repec) 
Economic Bulletin