TITLE: Essays on Fiscal Policy

 

 

ABSTRACT

 

 

The main purpose of this Thesis is the discussion and analysis of several macroeconomic consequences of fiscal policy concerning the following topics: Ricardian Equivalence hypothesis; fiscal policy sustainability; the fiscal theory of price level and the expansionary fiscal contractions issue.

 

Concerning the existence of non-Keynesian effects of fiscal policy, a theoretical model is presented, with two periods, where there are rationed consumers and the domestic interest rate depends namely on the level of public revenues. In this set-up, the bigger the proportion of non-rationed consumers the bigger the probability that fiscal policy non-Keynesian effects may arise. From the empirical analysis, with panel data, the expansionary fiscal contractions hypothesis does not seem to be corroborated by the data for the EU-15. To assess the public debt neutrality hypothesis, those countries were classified in two groups, according to their level of indebtedness: “more indebted” and “less indebted”, a somehow different methodology from the vast majority of the literature. The results seem to indicate that consumers are less Ricardian when the debt-to-GDP ratio is higher. Additionally, the empirical research implemented, shows that fiscal policy may not have been sustainable in the majority of the countries between 1970 e 2000.

 

 

 

Keywords: Ricardian Equivalence; fiscal policy sustainability; fiscal theory of price level; non-Keynesian effects; Euro area; panel data.