Can debt ceiling and government shutdown predict us real stock returns? A bootstrap rolling window approach. - Gli effetti sui rendimenti azionari reali negli USA del tetto del debito pubblico e del blocco della spesa

Goodness C. Aye, Mehmet Balcilar, Ghassen El Montasser, Rangan Gupta and Nangamso C. Manjez
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Goodness C. Aye: Department of Economics, University of Pretoria, Postal: Lynnwood Road Pretoria 0002 South Africa, http://www.up.ac.za/
Nangamso C. Manjez: Department of E conomics, University of Pretoria, Postal: Lynnwood Road Pretoria 0002 South Africa, http://www.up.ac.za/

Economia Internazionale / International Economics, 2016, vol. 69, issue 1, 11-32

Abstract: This paper investigates the in-sample predictabilit y of debt ceiling and government shutdown for real stock returns in the U.S, using r olling window Granger non-causality estimation. Causal links often evolve over time so the use of the bootstrap rolling window approach will account for potential time variations in the relationships. We use monthly time series data on measures of debt ceiling and governm ent shutdown, and real stock returns, covering the period of 1985:M2 to 2013:M9. Since th e debt ceiling and government shutdown variables under analysis are exogenous, the use of the in-sample predictability to analyse the relation-ship running from debt ceiling to real sto ck returns, as well as, from government shutdown to real stock returns will provide evidenc e of not only whether in-sample predictability exists, but also how predictability varies over time i.e. significance in episodes of high values of index. The full sample bootstrap no n-Granger causality test results suggest existence of no in-sample predictability of debt c eiling or government shutdown for real stock returns in the U.S. economy. The stability tests sh ow evidence of parameter instability in the estimated equations. Therefore, we make use of the bootstrap rolling window (24 months) approach to investigate the changes in the in-sampl e predictability of the relationship, and detect signifi-cant in-sample predictability of deb t ceiling and government shutdown for real stock returns at different sub-periods, correspondi ng especially after the phases where there were sharp increases in the indexes of debt ceiling and government shutdown. - Questo studio esamina la predittibilità – nel campi one – degli effetti sui rendimenti azionari reali USA del tetto al debito e del blocco della spesa governativa. Poiché le relazioni causali spesso variano nel temp o si è adottato un bootstrap rolling window approach cercando di valutare non soltanto se detta preditt ibilità sussista ma anche come essa varia nel tempo.

Keywords: Debt Ceiling; Government Shutdown; Real S tock Returns; Rolling Window; Bootstrap (search for similar items in EconPapers)
JEL-codes: C32 G18 (search for similar items in EconPapers)
Date: 2016
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