Publicação
Nonlinear effects of asset prices on fiscal policy : evidence from the UK, Italy and Spain
| Resumo: | We test for nonlinear effects of asset prices on the fiscal policy of threemajor European economies (the UK, Italy and Spain).We model primary government spending and government revenue as time-varying transition probability Markovian processes (TVPMS). We find that while in Italy fiscal policy is substantially neutral vis-à-vis asset price movements, fiscal authorities in the UK and Spain seem to track the dynamics of wealth. In particular, revenue-based fiscal policy interventions in the UK are particularly effective in counteracting shocks in the asset markets induced by sharp wealth fluctuations. Similarly, in Spain, the spending-side of the fiscal policy plays a dominant role in stabilizing stock and housing markets. |
|---|---|
| Autores principais: | Agnello, Luca |
| Outros Autores: | Dufrénot, Gilles; Sousa, Ricardo M. |
| Assunto: | Fiscal policy Asset prices Time-varying probability Markov process |
| Ano: | 2015 |
| País: | Portugal |
| Tipo de documento: | artigo |
| Tipo de acesso: | acesso restrito |
| Instituição associada: | Universidade do Minho |
| Idioma: | inglês |
| Origem: | RepositóriUM - Universidade do Minho |
| Resumo: | We test for nonlinear effects of asset prices on the fiscal policy of threemajor European economies (the UK, Italy and Spain).We model primary government spending and government revenue as time-varying transition probability Markovian processes (TVPMS). We find that while in Italy fiscal policy is substantially neutral vis-à-vis asset price movements, fiscal authorities in the UK and Spain seem to track the dynamics of wealth. In particular, revenue-based fiscal policy interventions in the UK are particularly effective in counteracting shocks in the asset markets induced by sharp wealth fluctuations. Similarly, in Spain, the spending-side of the fiscal policy plays a dominant role in stabilizing stock and housing markets. |
|---|