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Fiscal policy and financial market movements

Listed author(s):
  • Athanasios Tagkalakis

    (Bank of Greece)

This paper estimates a fiscal policy reaction function in order to investigate the links between financial and real estate market movements and fiscal policy outcomes. An increase in asset prices affects in a positive and significant manner primary balances, with the response reflecting both an increase in government revenues and a fall in government spending. The most important impact on fiscal balances is due to changes in residential property prices. Changes in equity and commercial property prices are also important determinants of fiscal balances. Our findings suggest that the steepening of the slope of the yield curve contributes to expenditure based fiscal discipline.

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File URL: http://www.bankofgreece.gr/BogEkdoseis/Paper2010116.pdf
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Paper provided by Bank of Greece in its series Working Papers with number 116.

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Length: 92
Date of creation: Jul 2010
Handle: RePEc:bog:wpaper:116
Contact details of provider: Web page: http://www.bankofgreece.gr

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