This paper presents estimates of fiscal multipliers in Paraguay following different econometric
techniques and identification approaches. The results point to multipliers for capital
expenditure that are substantially higher than multipliers for current expenditure. In addition,
the evidence suggests that tax multipliers are close to zero when using conventional
identification approaches, but estimates can be much larger when considering the 'narrative'
approach. One implication of the results is that the balanced budget multiplier for Paraguay
i.e. the effect of on output of an increase in expenditures (in particular capital expenditure)
financed by taxes is likely to be positive.