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Title: Fiscal policy, housing and stock prices
Author: Afonso, António
Sousa, Ricardo M.
Keywords: Bayesian Structural VAR
fiscal policy
housing prices
stock prices
Issue Date: Jan-2009
Publisher: European Central Bank
Citation: Afonso, António e Ricardo M. Sousa. 2009. "Fiscal policy, housing and stock prices". European Central Bank working paper series nº 990-2009
Series/Report no.: European Central Bank working paper series;nº 990-2009
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.
ISSN: 1725-2806
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Appears in Collections:DE - Documentos de trabalho / Working Papers

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