Fiscal policy and asset prices

Luca Agnello, Ricardo M. Sousa, Luca Agnello

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39 Citazioni (Scopus)


We analyse the impact of fiscal policy on asset prices using a panel vector auto-regressive (PVAR) approach and quarterly data for ten industrialized countries. We find that positive fiscal shocks lead to a temporary fall in stock prices and a gradual and persistent decrease in housing prices. The empirical findings also point to: (i) a contractionary effect of fiscal policy on output in line with the existence of crowding-out effects and the deterioration of credit conditions; (ii) a weakening of the effectiveness of fiscal policy in recent times; (iii) a more persistent response of asset prices for countries with a lower degree of openness; (iv) a larger impact of fiscal policy on asset prices for small countries; (v) a close link between the responsiveness of asset prices to fiscal policy and the government’s size; (vi) an increase of the sensitivity of asset prices to fiscal policy shocks following the process of financial deregulation and mortgage liberalization; and (vii) significant fiscal multiplier effects in the context of severe housing busts. Finally, the evidence suggests that changes in equity prices may help governments towards consolidation of public finances.
Lingua originaleEnglish
pagine (da-a)154-177
Numero di pagine24
RivistaBulletin of Economic Research
Stato di pubblicazionePublished - 2013

All Science Journal Classification (ASJC) codes

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