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On the Stock Markets’ Reactions to Taxation and Public Expenditure. LEQS Discussion Paper No. 115/2016 September 2016

Foresti, Pasquale and Napolitano, Oreste (2016) On the Stock Markets’ Reactions to Taxation and Public Expenditure. LEQS Discussion Paper No. 115/2016 September 2016. [Discussion Paper]

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    Abstract

    In this paper a panel analysis is employed to investigate the effects of governments’ expenditure and taxation on stock market indexes in 11 members of the Eurozone. A significant number of studies have focused on the effects of monetary policy on the Eurozone stock markets, while only a limited number of papers have investigated the effects of fiscal policy on the stock markets. Therefore, we know little, if anything, on the sign and the stability of the stock markets’ reaction to taxation and public expenditure. Our results show that fiscal maneuvers influence stock markets and that, following an increase (decrease) in public deficit, stock markets indexes go down (up). Nevertheless, further analysis shows that the signs of the estimated stock markets’ reactions are not constant over time and that they can change according to the surrounding macroeconomic scenario.

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    Item Type: Discussion Paper
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > tax policy
    EU policies and themes > Policies & related activities > economic and financial affairs > banks/financial markets
    EU policies and themes > Policies & related activities > economic and financial affairs > Single Market > capital, goods, services, workers
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > London School of Economics and Political Science (European Institute) > LEQS Discussion Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 05 Aug 2018 14:09
    Number of Pages: 26
    Last Modified: 22 Aug 2018 17:06
    URI: http://aei.pitt.edu/id/eprint/93633

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