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Stock Market Response To Fiscal Policy Shocks: Evidence From Eu Countries From Central And Eastern Europe

Author

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  • Stela JAKOVA

    (Academy of Economic Studies Bucharest, Romania)

Abstract

Expanding the existing literature regarding the relationship between fiscal policy and sock market, this paper will analyse the response of stock markets from Central and Eastern Europe (Bulgaria, Check Republic, Slovakia, Poland and Romania), to a deviation in fiscal policy by using a Vector Autoregressive model (VAR) for quarterly data, for the period 2004-2015. The effect of crisis over stock market performance is significantly negative for all analysed countries, while governmental expenditure increased in Bulgaria, Check Republic, Slovakia and Romania, and governmental revenues increased only in Check Republic, Hungary and Slovakia. The paper highlights that an increase of stock market performance leads to a decrease of governmental expenditure in Slovakia, Romania, Check Republic and Bulgaria, due to the existence of a performant private sector which comes and compensates the investments. The Romanian’s governmental expenditure decreased considerably in comparison with other countries. Also, in Poland case, there is no relation between stock market performance and governmental expenditure.

Suggested Citation

  • Stela JAKOVA, 2016. "Stock Market Response To Fiscal Policy Shocks: Evidence From Eu Countries From Central And Eastern Europe," Network Intelligence Studies, Romanian Foundation for Business Intelligence, Editorial Department, issue 8, pages 161-169, December.
    • Handle: RePEc:cmj:networ:y:2016:i:8:p:161-169
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    Cited by:

    1. Chiwei Su & Yiru Liu & Chang Liu & Ran Tao, 2022. "The Impact of Medical and Health Fiscal Expenditures on Pharmaceutical Industry Stock Index in China," IJERPH, MDPI, vol. 19(18), pages 1-14, September.
    2. Michael Anthony Adams, 2020. "Fiscal Policy and Stock Market Efficiency in the USA: An ARDL Bounds Testing Approach," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 9(2), pages 73-81.
    3. Fakir Tajul Islam & Md. Shahnawaz Mostofa & Afrida Akhter Tithi, 2017. "Macroeconomic and Institutional Determinants of Capital Market Performance in Bangladesh: A Case of Dhaka Stock Exchange," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 7(1), pages 306-311, January.

    More about this item

    Keywords

    Fiscal policy; Capital market; VAR; Financial crisis;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • G01 - Financial Economics - - General - - - Financial Crises

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