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Effects of Macroeconomic Policies and Stock Market Performance on the Estonian Economy

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  • Yu Hsing

Abstract

Based on a general equilibrium model, this study finds that real output in Estonia is positively associated with real quantity of money and negatively influenced by real depreciation of the kroon, real stock prices, and the expected inflation rate. Government deficit spending is found to be insignificant. Policy implications are that fiscal discipline pursued by the Estonian government is appropriate, that a stronger currency may better serve Estonia, and that the wealth effect of an increase in the stock price on real money balances is greater than the substitution effect.

Suggested Citation

  • Yu Hsing, 2005. "Effects of Macroeconomic Policies and Stock Market Performance on the Estonian Economy," Prague Economic Papers, Prague University of Economics and Business, vol. 2005(2), pages 109-116.
    • Handle: RePEc:prg:jnlpep:v:2005:y:2005:i:2:id:256:p:109-116
    DOI: 10.18267/j.pep.256
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    More about this item

    Keywords

    deficit spending; real depreciation; stock prices; wealth effect; substitution effect;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • P24 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation

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