Article by ISEG professor and researcher accepted for publication in the international journal - Economic Modelling

The article "What are the effects of fiscal policy on asset markets?" was published in the international journal Economic Modelling, by António Afonso, Associate Professor with Aggregation at ISEG and researcher at UECE, in co-authorship with Ricardo Sousa (University of Minho).

Abstract: We investigate the link between fiscal policy shocks and asset markets. Our results show that spending shocks have: a positive and persistent effect on GDP in the U.S. and in the U.K., while for Germany and Italy, such impact is temporary; a positive and persistent effect on housing prices; a negative effect on stock prices; and mixed effects on the price level. A VAR counter-factual exercise suggests that fiscal shocks play a minor role in the asset markets of the U.S. and Germany, and substantially increase the variability of housing and stock prices in the U.K., while government revenue shocks have increased volatility in Italy.

Online article: Economic Modelling, 2011, 28 (4), 1871- 1890.
http://www.sciencedirect.com/science/article/pii/S0264999311000770