Assessing the Macroeconomic Effects of Fiscal

The focus of this paper is on the short-term macroeconomic effects of fiscalpolicy in Colombia in a structural vector autoregression context. Governmentspending shocks are found to have positive and significant effects on output,private consumption, employment, prices and short-term interest rates. Thecumulative output multiplier fluctuates between 1.12 and 1.19 from the first tothird year after the spending innovation. Shocks to direct taxation seem to beless efficient, because they mainly affect private investment, whereas shocks toindirect taxation do not seem to affect real activities significantly. From apolicy perspective, our results support the smoothing role of fiscal policy onoutput fluctuations, which implies its capacity to restore real activity effectivelyin critical times like the ones currently being forecast. From a theoreticalstandpoint, the results are consistent with real business cycle and Keynesianmodels of both traditional partial equilibrium and new general equilibriumtypes.Keywords: