Fiscal Regime Shifts in Portugal
ISEG-UTL Department of Economics Working Paper No. 41/2009/DE/UECE
29 Pages Posted: 25 Oct 2009
Date Written: October 22, 2009
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: Suggested Citation