Fiscal Regime Shifts in Portugal
University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics)
Free University of Brussels (VUB) - Faculty of Economic, Social and Political Sciences; European University Institute - Economics Department (ECO)
Ricardo M. Sousa
University of Minho; Economic Policies Research Unit (NIPE); London School of Economics & Political Science (LSE) - Financial Markets Group; London School of Economics
October 22, 2009
ISEG-UTL Department of Economics Working Paper No. 41/2009/DE/UECE
We estimate changes in fiscal policy regimes in Portugal with a Markov Switching regression of fiscal policy rules for the period 1978-2007, using a new dataset of fiscal quarterly series. We find evidence of a deficit bias, while repeated reversals of taxes making the budget procyclical. Economic booms have typically been used to relax tax pressure, especially during elections. One-off measures have been preferred over structural ones to contain the deficit during economic crises. The EU fiscal rules prompted temporary consolidation, but did not permanently change the budgeting process.
Number of Pages in PDF File: 29
Keywords: fiscal regimes, Markov Switching, Portugal
JEL Classification: E62, E65, H11, H62
Date posted: October 25, 2009
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