The effect of asset price volatility on fiscal policy outcomes
AbstractThis 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.
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Bibliographic InfoPaper provided by Bank of Greece in its series Working Papers with number 106.
Date of creation: Nov 2009
Date of revision:
Asset prices; fiscal policy; volatility;
Find related papers by JEL classification:
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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