This paper studies the effects of fiscal policy on GDP across highly indebted countries of the Euro area periphery. By estimating a structural VAR econometric model for Cyprus, Greece, Ireland, Italy, Portugal and Spain during 1995:Q1-2013:Q3, this study shows that the output responses are not uniform following a fiscal shock. The magnitude of the cumulative multiplier after a government spending shock is very high in Cyprus, Greece and Italy. In most countries the output response after a shock in net taxes is negative or close to zero.

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