Tax Elasticities and the Macroeconomic Effects of Fiscal Policy in Greece

Tax Elasticities and the Macroeconomic Effects of Fiscal Policy in Greece

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 ta...

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Bibliographic Details
Published in:Applied economics quarterly 2018-01, Vol.64 (1), p.59-98
Main Author: Zervas, Andreas
Format: Article
Language:eng ; ger
Subjects:
Averages
Classification
Economic models
Elasticity
Expenditures
Fiscal policy
Income taxes
Macroeconomics
Multiplier
Taxation
Taxes
Time series
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Summary: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
ISSN:1611-6607
1865-5122