The effect of asset price volatility on fiscal policy outcomes

Athanasios Tagkalakis

No 106, Working Papers from Bank of Greece

Abstract: This paper examines the effect of asset price volatility on fiscal policy stance. We find that asset price volatility affects the volatility of discretionary fiscal policy in a positive and significant manner, which according to Fatas and Mihov (2003) has negative repercussions on output volatility and economic growth. Higher residential property price volatility amplifies both the volatility of government spending and the volatility of the discretionary fiscal policy stance. Equity price volatility increases the volatility of the fiscal policy stance, primarily via the government revenue channel.

Keywords: Asset prices; fiscal policy; volatility (search for similar items in EconPapers)
JEL-codes: E32 E61 E62 H61 H62 (search for similar items in EconPapers)
Pages: 16
Date: 2009-11
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:bog:wpaper:106

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