Abstract:

This paper focuses on the effects of fiscal policy in Netherlands analyzed in a VAR context. Fiscal shocks are found to involve significant impacts on GDP, unemployment rate, consumption and investment. In this regard, Keynesian effects are observed. In addition, the results suggest that unemployment rises in response to a fiscal contraction whereas it falls following a fiscal expansion. When government spending increases output increases; when total net taxes increase output falls. A social security tax innovation also leads to a rise in unemployment rate. Moreover, the results indicate that the social security taxes is a more effective tool compared to total net taxes for policymakers in Netherlands in terms of GDP and its private components

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