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Tax Elasticities and the Macroeconomic Effects of Fiscal Policy in Greece
Applied Economics Quarterly, Vol. 64 (2018), Iss. 1 : pp. 59–98
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Zervas, Andreas, Hellenic Republic, Ministry of Finance, General Directorate of Economic Policy, Athens, Greece. Tel: +302103332895.
Cited By
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Introduction to the Special Issue on Applied Macroeconomics, Finance, and Banking
Fountas, Stilianos
Applied Economics Quarterly, Vol. 64 (2018), Iss. 1 P.1
https://doi.org/10.3790/aeq.64.1.1 [Citations: 0]
Abstract
Abstract
In this paper I explore the effects of fiscal policy, in particular of both spending and taxes, on the Greek GDP, in the form of multipliers of GDP to a shock on the relevant fiscal instrument. A novel feature of this paper is that I try to estimate the effects of particular spending and tax components on GDP. I use Structural Vector Autoregression models and contemporaneous restrictions to identify fiscal shocks. A methodological difference with traditional SVARs is that I try to estimate the elasticities of the different taxes to GDP using the transitory components of the relevant time series. The results indicate that the macroeconomic effects of different fiscal instruments vary a lot, but spending on average has a higher multiplier than taxes, while personal income tax and fuel tax have the worst impact on the economy.
JEL classifications: C32, E62, H2
Keywords: Fiscal Policy, Government Spending, Taxes, Macroeconomics, Structural Vector Autoregressions
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Andreas Zervas: Tax Elasticities and the Macroeconomic Effects of Fiscal Policy in Greece | 1 | ||
| Abstract | 1 | ||
| 1. Introduction | 1 | ||
| 2. Methodology | 4 | ||
| 2.1 Budget Elasticities and Structural Budget Deficits | 4 | ||
| 2.2 Multivariate Decomposition into Permanent and Transitory Components | 4 | ||
| 2.3 Structural VARs and Fiscal Multipliers | 7 | ||
| 3. Results | 9 | ||
| 3.1 Data | 9 | ||
| 3.2 Estimating Elasticities of Total Taxes | 9 | ||
| 3.3 Elasticities of Individual Taxes | 1 | ||
| 4. The Effects of Fiscal Policy on the Economy | 1 | ||
| 4.1 Multipliers of Spending and Tax Aggregates | 1 | ||
| 4.2 Multipliers of Specific Taxes | 1 | ||
| 4.3 Government Spending Multipliers | 1 | ||
| 4.4 Robustness Checks | 1 | ||
| 4.5 The Effect of Consolidation Measures | 2 | ||
| 5. Conclusions | 2 | ||
| References | 2 | ||
| Appendix to “Tax Elasticities and the Macroeconomic Effects of Fiscal Policy in Greece” | 2 | ||
| A. Further Analysis of Taxes | 2 | ||
| B. Using ESA 2010 Tax Data | 2 | ||
| C. Multipliers of Extensions | 3 | ||
| D. An Estimate of the Consolidation Measures | 3 |