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The effect of asset price volatility on fiscal policy outcomes

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  • Athanasios Tagkalakis

    ()
    (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.

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Bibliographic Info

Paper provided by Bank of Greece in its series Working Papers with number 106.

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Length: 16
Date of creation: Nov 2009
Date of revision:
Handle: RePEc:bog:wpaper:106

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Web page: http://www.bankofgreece.gr
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Related research

Keywords: Asset prices; fiscal policy; volatility;

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References

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  1. Gali, Jordi, 1994. "Government size and macroeconomic stability," European Economic Review, Elsevier, vol. 38(1), pages 117-132, January.
  2. Ludger Schuknecht & Albert Jaeger, 2004. "Boom-Bust Phases in Asset Prices and Fiscal Policy Behavior," IMF Working Papers 04/54, International Monetary Fund.
  3. Athanasios Tagkalakis, 2009. "Fiscal adjustments and asset price movements," Working Papers 104, Bank of Greece.
  4. Jordi Gali & Roberto Perotti, 2003. "Fiscal Policy and Monetary Integration in Europe," NBER Working Papers 9773, National Bureau of Economic Research, Inc.
  5. Fatás, Antonio & Mihov, Ilian, 2002. "The Case for Restricting Fiscal Policy Discretion," CEPR Discussion Papers 3277, C.E.P.R. Discussion Papers.
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Cited by:
  1. Alexander Zimper, 2014. "The minimal confidence levels of Basel capital regulation," Journal of Banking Regulation, Palgrave Macmillan, vol. 15(2), pages 129-143, April.
  2. Rangan Gupta & Charl Jooste & Kanyane Matlou, 2013. "A Time-Varying Approach to Analysing Fiscal Policy and Asset Prices in South Africa," Working Papers 201303, University of Pretoria, Department of Economics.
  3. Vasilis Droucopoulos & Panagiotis Chronis, 2010. "“Assessing market dominance”: a comment and an extension," Working Papers 109, Bank of Greece.

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