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Fiscal adjustments and asset price changes

  • Tagkalakis, Athanasios

This paper examines the links between asset price movements and fiscal adjustments. Our findings suggest that higher asset prices improve fiscal balances and contribute to sustained consolidation. This refers in particular to real equity and real residential property prices. We find evidence that revenue windfalls due to higher residential, commercial property and equity prices can be sustained, thus, improving revenue and primary balances. There is evidence of a positive association of some asset prices changes with expenditure adjustments. Fiscal adjustments and in particular sharp spending cuts are more likely to be successful if undertaken in periods of dire budgetary and economic conditions.

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File URL: http://www.sciencedirect.com/science/article/B6X4M-51KK900-1/2/d1dbd5f11fb7f645cd5922e581462cd1
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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 33 (2011)
Issue (Month): 2 (June)
Pages: 206-223

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Handle: RePEc:eee:jmacro:v:33:y:2011:i:2:p:206-223
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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