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FISCAL ADJUSTMENTS AND ASSET PRICE MOVEMENTS

 

 

 

 

 

 

Athanasios Tagkalakis

Bank of Greece

 

 

 

 

 

 

ABTRACT

This paper examines the links between asset price movements and fiscal adjustments. Our findings suggest that a pick up in asset prices increases the probability of initiating a fiscal adjustment, but it does not necessarily lead to a sustainable correction of fiscal imbalances. However, higher real equity prices increase the probability of success.

 

Keywords: Asset prices; fiscal adjustments.

 

JEL classification: E61, E62, H61, H62, E32

 

 

 

 

Acknowledgements: I would like to thank the Bank of International Settlements for kindly providing the asset price data. I would also like to thank Christos Antonopoulos, Fragiskos Archontakis, Claudio Borio, Heather Gibson, Panagiotis Konstantinou, Pantelis Tagkalakis, Joel Slemrod and Jose Tavares. The views of the paper do not necessarily reflect those of the Bank of Greece.

 

 

 

Correspondence:

Athanasios Tagkalakis

Economic Research Department,

Bank of Greece, 21 E. Venizelos Ave.,

10250, Athens, Greece

Tel.:+30-210-320 2442.

Email: atagkalakis@bankofgreece.gr



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