The time-series linkages between US fiscal policy and asset prices

Show simple item record El Montasser, Ghassen Gupta, Rangan Jooste, Charl Miller, Stephen M. 2021-09-20T09:32:25Z 2021-09-20T09:32:25Z 2020-05
dc.description.abstract This article studies the interplay of fiscal policy and asset price returns of the United States in a time-varying parameter vector autoregressive (VAR) model. Using annual data from 1890 to 2013, we study the effects of dynamic shocks to both fiscal policy on asset returns and asset returns on fiscal policy. Distinguishing between low-volatility (bull market) and high-volatility (bear market) regimes together with a time-varying parameter VAR model enables us to isolate the different sizes and signs of responses to shocks during different time periods. The results indicate that increases in the primary surplus-to-gross-domestic-product ratio decrease house returns over the entire sample and at each impulse horizon. Unlike the house return responses, stock returns only decrease in the first year after the fiscal shock but then increase for the following eight years. Furthermore, the findings show that asset return movements affect fiscal policy, whereby fiscal policy responds more to equity returns than to house returns. The response of fiscal policy to asset returns proves relatively stable and constant over time while controlling for various asset return regimes. Asset returns respond uniformly to fiscal policy shocks since the 1900s. en_ZA
dc.description.department Economics en_ZA
dc.description.librarian hj2021 en_ZA
dc.description.uri en_ZA
dc.identifier.citation Montasser GE, Gupta R, Charl J, Miller SM. The Time-series Linkages between US Fiscal Policy and Asset Prices. Public Finance Review. 2020;48(3):303-339. doi:10.1177/1091142120916032. en_ZA
dc.identifier.issn 1091-1421 (print)
dc.identifier.issn 1552-7530 (online)
dc.identifier.other 10.1177/1091142120916032
dc.language.iso en en_ZA
dc.publisher Sage en_ZA
dc.rights © The Author(s) 2020 en_ZA
dc.subject Time-varying parameter vector autoregressive (TVP-VAR) en_ZA
dc.subject Countercyclical fiscal policy en_ZA
dc.subject Stock returns en_ZA
dc.subject House returns en_ZA
dc.title The time-series linkages between US fiscal policy and asset prices en_ZA
dc.type Postprint Article en_ZA

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