Economics, Econometrics and Finance
7 years ago

Fiscal policy shocks after 1980 linked to negative stock prices.

European Economic Review
Fiscal policy shocks and stock prices in the United States
Haroon Mumtaz, Konstantinos Theodoridis

Paper Summary

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The response of US stock prices to fiscal shocks changed in 1980. Before 1980, higher stock prices followed an increase in government spending or revenue. After 1980, stock prices decreased after the same fiscal shock. The change may be due to different economic mechanisms at play before and after 1980.