Abstract

CARRILLO MALDONADO, Paúl A.. The effect of fiscal policy on expansions and recessions in Ecuador: A MSVAR model. Cuad. Econ. [online]. 2017, vol.36, n.71, pp.405-439. ISSN 0121-4772.  https://doi.org/10.15446/cuad.econ.v36vn72.53570.

This paper provides evidence of the effect of fiscal policy on the Ecuadorian economy in periods of recession and expansion between 2003-2013, using a MSVAR with government spending, oil income, taxes, and an IAE-NP. We show that government spending has a positive impact on economic activity, and there is a greater effect during recessions than there is during expansions. An increase in taxes has a negative effect, and there is a greater effect during times of crisis. Oil income generates a permanent positive impact on the economy, and it has a greater effect during periods of expansion. It should be noted that only the effect of the tax increase is statistically significant: a result that is consistent with previous studies of the Ecuadorian economy.

JEL: E62, E32, C34, C32.

Keywords : Fiscal policy; GPD; business cycles; MSVAR; Ecuador.

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