Sep 21, 2011

Articles in journals

Afonso, A., Sousa, R.

18

4

We use the approach developed by Afonso et al. (2008) to assess long-term fiscal developments in Portugal, where public spending control has been a problem since joining the EU un 1986. Drawing on quarterly data, we use a Three-Stage Least Square method and a system of government revenue and spending equations to recursively estimate two components of fiscal policy - responsiveness and persistence - and to infer about the sources of fiscal deterioration (improvement). The results suggest that: (i) government spending exhibits a higher persistence than government revenue; and (ii) government revenue is more responsive to the business cycle than government spending

Fiscal deterioration,fiscal sustainability