Fiscal Policy and Financial Markets  

Oleh:

Akitoby, Bernardin ; Stratmann, Thomas

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Economic Journal (EBSCO) vol. 118 no. 533 (Nov. 2008), page 1971.
Topik: Fiscal Policy; Financial Markets; Tax
Fulltext: 1971.pdf (98.61KB)

Ketersediaan

Perpustakaan Pusat (Semanggi) Nomor Panggil: EE28.29 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

We examine the effect of fiscal policy on sovereign risk spreads and investigate whether the interaction of fiscal variables with political institutions affect financial markets. Using panel data from emerging market countries, we find that revenue-based adjustment lowers spreads more than spending-based adjustment. Financial markets also react to the composition of spending. Cuts in current spending lower spreads more than cuts in investment. We show that debt-financed spending increases sovereign risk, while tax-financed spending lowers spreads, suggesting that international investors prefer the latter. Further, we find evidence that financial markets' reaction to fiscal policy depends on political institutions.

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