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Assessing the macroeconomic effects of fiscal policy in Colombia

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Purpose – The purpose of this paper is to study the short-term macroeconomic effects of the fiscal
policy in Colombia for the 1980-2007 period using a structural vector autoregression (SVAR) model.
Design/methodology/approach – The authors’ benchmark is a five-variable SVAR model which
includes government spending, output, tax revenues, inflation and short-term interest rates.
In addition, the authors specified six-variable VAR models, adding in turn private consumption,
private investment, the unemployment rate and the real minimum wage to the last set of variables.
Two alternative identification techniques are used in the VARs to check the robustness of the results.
Findings – The following effects of a positive government spending shock are found. First, the GDP
responds positively and significantly during the first six quarters. The cumulative output multiplier
fluctuates between 1.12 and 1.19. Second, both inflation and nominal interest rates respond positively
and significantly. Third, the authors find a significant positive response by both private consumption
and private investment. Finally, the unemployment rate reacts negatively and significantly.
Research limitations/implications – The most surprising result comes from the response of
output to a positive shock in taxes. Nonetheless, the positive respond of the GDP is short lived and has
little significance.
Practical implications – The authors’ results support the smoothing role of fiscal policy on output
fluctuations, which implies its capacity to restore real activity effectively in critical times like the ones
currently being forecast.
Originality/value – The negligible results found previously for Colombia could be related to the
fiscal data used, which are not keep coherence with national accounting. To solve these obstacles, a
quarterly fiscal database is assembled on an approximately accrual basis for the general government.

Keywords Colombia, Fiscal policy, Macroeconomics, Public finance, Monetary policy,Keynesian economics

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Informasi Detail

Judul Seri

Journal of Financial Economic Policy

No. Panggil

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Penerbit

: Emerald Group., 2011

Deskripsi Fisik

Journal of Financial Economic Policy Vol. 3 No. 3, 2011 pp. 206-228

Bahasa

English

ISBN/ISSN

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Klasifikasi

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Tipe Isi

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Tipe Media

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Tipe Pembawa

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Edisi

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Subjek

EKONOMI

Info Detail Spesifik

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Pernyataan Tanggungjawab

Asmawati/Syahrial

Versi lain/terkait

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