Fiscal Policy, Housing and Stock Prices

Antonio Afonso and Ricardo Jorge Magalhães de Abreu Santos Sousa ()

No 2008/58, Working Papers from Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.

Abstract: This paper investigates the link between fiscal policy shocks and movements in asset markets using a Fully Simultaneous System approach in a Bayesian framework. Building on the works of Blanchard and Perotti (2002), Leeper and Zha (2003), and Sims and Zha (1999, 2006), the empirical evidence for the U.S., the U.K., Germany, and Italy shows that it is important to explicitly consider the government debt dynamics when assessing the macroeconomic effects of fiscal policy and its impact on asset markets. In addition, the results from a VAR counter-factual exercise suggest that: (i) fiscal policy shocks play a minor role in the asset markets of the U.S. and Germany; (ii) they substantially increase the variability of housing and stock prices in the U.K..; and (iii) government revenue shocks have apparently contributed to an increase of volatility in Italy.

Keywords: Bayesian Structural VAR; fiscal policy; housing prices; stock prices. (search for similar items in EconPapers)
JEL-codes: C32 E62 G10 H62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-ure
Date: 2008-12
View list of references View citations in EconPapers

Downloads: (external link)
http://pascal.iseg.utl.pt/~depeco/wp/wp582008.pdf (application/pdf)

Related works:
Working Paper: Fiscal Policy, Housing and Stock Prices (2008)
Working Paper: Fiscal policy, housing and stock prices (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ise:isegwp:wp582008

Access Statistics for this paper

More papers in Working Papers from Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.
Address: Department of Economics, School of Economics and Management (ISEG), Technical University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Series data maintained by Vitor Escaria ().