Fiscal Policy and Financial Markets*

Akitoby, Bernardin; Stratmann, Thomas

doi:10.1111/j.1468-0297.2008.02198.x

Cited by 142 publications

(97 citation statements)

References 28 publications

(29 reference statements)

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“…This finding is in line with Akitoby and Stratmann (2008), Ardagna (2009), Agnello and Sousa (2010) and Sousa (2011, 2012). On the monetary policy side, a positive interest rate change causes a decline in the stock market (similar findings were reported for the UK by Bredin et al, 2005).…”

Section: United Kingdomsupporting

confidence: 78%

Stock market response to monetary and fiscal policy shocks: Multi-country evidence

2013

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A Structural VAR model is employed to investigate the effects of monetary and fiscal policy shocks on stock market performance in Germany, UK and the US. A significant number of past studies have concentrated their attention on the relationship between monetary policy and stock market performance, yet only few on the effects of fiscal policy on stock markets. Even more we know little, if any, on the effects of fiscal and monetary policy on stock market performance when the two policies interact. This study aims to fill this void. Our results show that both fiscal and monetary policies influence the stock market, via either direct or indirect channels. More importantly, we find evidence that the interaction between the two policies is very important in explaining stock market developments. Thus, investors and analysts in their effort to understand the relationship between macroeconomic policies and stock market performance should consider fiscal and monetary in tandem rather than in isolation.JEL: C32, G15, E44, E52, E62, H50

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Section: United Kingdomsupporting

confidence: 78%

Stock market response to monetary and fiscal policy shocks: Multi-country evidence

2013

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“…The variables which more often appear as significant are the level of GDP, GDP per capita or GDP growth rate (Hilscher and Nosbusch, 2010;Afonso, 2010), fiscal performance , through public debt and budget balance (Dell'Erba and Sola, 2011;Baldacci and Kumar, 2010;Afonso, Arghyrou and Kontonikas, 2012;Afonso, 2010;Amira, 2004;Laubach, 2009;Akitoby and Stratmann, 2006;Gruber and Kamin, 2010), current account balance (Amira, 2004) and monetary policy (Gruber and Kamin, 2010). …”

Section: Literature On Sovereign Spreads' Determinantsmentioning

confidence: 99%

Economic forecasts and sovereign yields

Afonso

Nunes

2015

Economic Modelling

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We assess whether the corrections made to the EC macro and fiscal forecasts (GDP growth rate, inflation, budget balance, debt ratio, current account) have an impact in sovereign yields. We a panel analysis of 15 EU countries (Austria, Belgium, Germany, Denmark, Spain, Finland, France, United Kingdom, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal and Sweden), for the period from 1999:1 until 2012:1, and we also analyse each country individually, on the basis of a SUR estimation. We find that corrections in the EC's forecasts impinge on 10-year sovereign bond yields, particularly corrections in fiscal variables, being more pronounced in countries with less favourable economic conditions. The penalization for the yields is higher in corrections for the current and next years than for previous years.

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“…The selection of variables used in this study is guided by Akitoby and Stratmann (2008), Ardagna (2011) andOkeahalam (2005). A correlation analysis for each SSA country is used as a first-step to assess the relation between the dependent and independent variables.…”

Section: Methodsmentioning

confidence: 99%

“…They conclude that money-financed fiscal policy adversely affects stock markets and distorts asset markets since it can interfere with the pricing mechanism. For instance, excessive lending to the state by domestic banks increases the cost of borrowed funds and crowds out private borrowing (Akitoby & Stratmann, 2008). When listed firms do not offer similar returns as substitutes to bank lending rates, they cannot attract much needed capital to grow and increase domestic stock market capitalization.…”

Section: Literature Reviewmentioning

confidence: 99%

Stock Markets Development in Sub-Saharan Africa: Business Regulations, Governance and Fiscal Policy

Afful¹,

Asiedu²

2013

IJEF

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This study examines the effectiveness of the state in stimulating stock market activity in sub-Saharan Africa (SSA) using fiscal policy, governance quality and stock market as the main determinant variables. Using annual data from six selected sub-Saharan African economies and employing a dynamic panel data estimating technique, we find that government effectiveness stimulates capitalization while business regulations decrease it in SSA. In addition, we find that final consumption expenditure, interest rate spread and credit to the state increase capitalization whereas credit to the private sector and inflation had adverse effects. With respect to business regulations, our study reveals that starting a business, closing it and enforcing contracts engender stock market activity in SSA. Among the several variables that stimulate stock market activity; only foreign direct investment (FDI) did increase capitalization. Thus, the study concludes that since not all government institutions and business regulations are critical to stock market development, various governments should be careful and selective in their economic stimulants if they want to develop their stock markets.

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Fiscal Policy and Financial Markets*

Cited by 142 publications

References 28 publications

Stock market response to monetary and fiscal policy shocks: Multi-country evidence

Stock market response to monetary and fiscal policy shocks: Multi-country evidence

Economic forecasts and sovereign yields

Stock Markets Development in Sub-Saharan Africa: Business Regulations, Governance and Fiscal Policy

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