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Fiscal Regime Shifts in Portugal

ISEG-UTL Department of Economics Working Paper No. 41/2009/DE/UECE

29 Pages Posted: 25 Oct 2009  

Antonio Afonso

University of Lisbon - School of Economics and Management; UECE (Research Unit on Complexity and Economics); University of Lisbon - ISEG School of Economics and Management; University of Lisbon - ISEG (School of Economics and Management)

Peter Claeys

Vrije Universiteit Brussel (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

Date Written: October 22, 2009

Abstract

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.

Keywords: fiscal regimes, Markov Switching, Portugal

JEL Classification: E62, E65, H11, H62

Suggested Citation

Afonso, Antonio and Claeys, Peter and Sousa, Ricardo M., Fiscal Regime Shifts in Portugal (October 22, 2009). ISEG-UTL Department of Economics Working Paper No. 41/2009/DE/UECE. Available at SSRN: https://ssrn.com/abstract=1492525 or http://dx.doi.org/10.2139/ssrn.1492525

Antonio Afonso (Contact Author)

University of Lisbon - ISEG (School of Economics and Management) ( email )

R. Miguel Lupi, 20
Lisbon, 1248-078
Portugal
+351 21 392 5985 (Phone)
+351 21 396 6407 (Fax)

HOME PAGE: http://www.iseg.utl.pt/~aafonso/AAWeb.html

University of Lisbon - School of Economics and Management ( email )

Rua do Quelhas, n.ยบ 6
Lisbon, 1200-781
Portugal

UECE (Research Unit on Complexity and Economics)

Rua Miguel Lupi 20
Lisbon, 1249-078
Portugal
+351-213 925 912 (Phone)
+351-213 971 196 (Fax)

HOME PAGE: http://www.iseg.utl.pt/~uece/

University of Lisbon - ISEG School of Economics and Management ( email )

Rua do Quelhas 6
Lisboa, 1200-781
Portugal

Peter Claeys

Vrije Universiteit Brussel (VUB) - Faculty of Economic, Social and Political Sciences ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 191
B-1050 Brussels
Belgium

European University Institute - Economics Department (ECO) ( email )

Villa San Paolo
Via della Piazzuola 43
50133 Florence
Italy

Ricardo Magalhaes Sousa

University of Minho ( email )

Campus Gualtar
Braga, 4710-057
Portugal
+351253604584 (Phone)
+351253676375 (Fax)

HOME PAGE: http://www.eeg.uminho.pt/economia/rjsousa

Economic Policies Research Unit (NIPE) ( email )

Campus de Gualtar
Braga, 4710-057
Portugal
+351253604584 (Phone)
+351253676375 (Fax)

HOME PAGE: http://www.eeg.uminho.pt/economia/rjsousa

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom

London School of Economics ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://econ.lse.ac.uk

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