Author
Listed:
- Luca Agnello
- Gilles Dufrénot
(Centre de recherche de la Banque de France - Banque de France, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)
- Ricardo M. Sousa
Abstract
We test for non-linear effects of asset prices on the fiscal policy of four major European economies (France, Italy, Spain and UK). We model government spending and revenue as time-varying transition probability Markovian processes (TVPMS), and find that: (i) in France and Italy, the impact of housing prices on government revenue is conditioned by the phase of the stock price cycle; (ii) a similar asymmetric pattern is found for the UK when considering the effect of stock price fluctuations on government revenue and spending vis-à-vis the troughs and peaks of aggregate wealth; and (iii) for Spain, a fall in government revenue is typically associated with a negative performance of the housing market, while government spending does not seem to adjust to the dynamics of financial market. In addition, the magnitude of the contribution of housing prices to changes in government revenue appears to have dominated that of stock prices in France and the UK. As for government spending, changes in this policy instrument are correlated with changes in asset prices, but the effect depends on the magnitude of the price variation and the influence of the output cycle. Therefore, the empirical evidence corroborates the idea that accounting for the dynamics of asset markets provides a more accurate assessment of the fiscal stance.
Suggested Citation
Luca Agnello & Gilles Dufrénot & Ricardo M. Sousa, 2014.
"Fiscal Policy and Asset Price Cycles: Evidence from Four European Countries,"
Post-Print
hal-01463933, HAL.
Handle:
RePEc:hal:journl:hal-01463933
Download full text from publisher
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below whether another version of this item is available online.
2. Check on the provider's
web page
whether it is in fact available.
3. Perform a
search for a similarly titled item that would be
available.
Corrections
All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-01463933. See general information about how to correct material in RePEc.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
We have no bibliographic references for this item. You can help adding them by using this form .
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .
Please note that corrections may take a couple of weeks to filter through
the various RePEc services.