Suchergebnisse

ABSTRACTI look at the linkages between monetary policy and asset wealth using quarterly data for the USA. I show that a positive interest rate shock leads to a fall in aggregate wealth and an important change in portfolio composition: housing wealth gradually decreases, but the effects are very persistent; and financial wealth quickly shrinks, but the impact is short‐lived. I also find that the money market can be characterized as follows: (i) the money demand has a large interest elasticity and a small output elasticity; and (ii) the estimated monetary policy reaction function highlights the special focus given by the central bank to developments in monetary aggregates. These features call for an approach whereby monetary authorities put more emphasis on tracking wealth developments, in particular, given the asset portfolio rebalancing between money holdings and financial and/or housing assets.

I show that when the ratio of asset wealth to human wealth falls, investors become more exposed to idiosyncratic shocks and demand higher stock and government bond risk premia. I find that the residuals from the cointegrating vector among asset wealth and labour income, wy, predict both future stock and bond returns in the Euro Area. Consequently, it can be used to track time-variation in risk premium. The results are robust to the inclusion of control variables and vis-a-vis other benchmark models. Finally, I show that, conditioning the predictive ability of wy on the financial stress conditions allows one to track better future time-variation in risk premium. Moreover, when financial stress increases, investors perceive a larger risk for both stocks and government bonds. ; Fundação para a Ciência e a Tecnologia ...

I show that when the ratio of asset wealth to human wealth falls, investors become more exposed to idiosyncratic shocks and demand higher stock and government bond risk premia. I find that the residuals from the cointegrating vector among asset wealth and labour income, wy, predict both future stock and bond returns in the Euro Area. Consequently, it can be used to track time-variation in risk premium. The results are robust to the inclusion of control variables and vis-a-vis other benchmark models. Finally, I show that, conditioning the predictive ability of wy on the financial stress conditions allows one to track better future time-variation in risk premium. Moreover, when financial stress increases, investors perceive a larger risk for both stocks and government bonds. ; COMPETE; QREN; UE Fundo Europeu de Desenvolvimento Regional ; Fundação para a Ciência e a Tecnologia ...

I assess the role of wealth and systemic risk in explaining future asset returns. I show that the residuals of the trend relationship among asset wealth and human wealth predict both stock returns and government bond yields. Using data for a set of industrialized countries, I find that when the wealth-to-income ratio falls, investors demand a higher risk premium for stocks. As for government bond returns: (i) when they are seen as a component of asset wealth, investors react in the same manner; (ii) if, however, investors perceive the increase in government bond returns as signalling a future rise in taxes or a deterioration of public finances, then investors interpret the fall in the wealth-to-income ratio as a fall in future bond premia. Finally, I show that the occurrence of crises episodes (in particular, systemic crises) amplifies the transmission of housing market shocks to financial markets and the banking sector. ; Fundação para a Ciência e a Tecnologia (FCT) - Programa Operacional Ciência e Inovação 2010 (POCI 2010) ; Fundo Europeu de Desenvolvimento Regional ...

In this paper, I assess the forecasting power of the residuals of the trend relationship among consumption, aggregate wealth, and labour income for stock returns and government bond yields in the euro area, the UK and the US . I find that when stock returns are expected to be higher in the future, forward-looking investors will temporarily allow consumption to rise. As for bond returns, when government bonds are seen as a component of asset wealth, then investors react in the same manner. If, however, investors perceive the increase in bond returns as signalling a future rise in taxes or a deterioration of public finances, then they will let consumption fall temporarily below its equilibrium level. ; Fundação para a Ciência e a Tecnologia (FCT) - Programa Operacional Ciência e Inovação 2010 (POCI 2010) ; Fundo Europeu de Desenvolvimento Regional ...

Ce papier se focalise sur l'étude de l'effet de richesse sur la consommation aux États-Unis, au Royaume-Uni et dans la zone euro, en utilisant des régressions linéaires et l'approche de régression quantile. Nos résultats montrent une élasticité élevée de la consommation par rapport à la richesse agrégée au Royaume-Uni, tandis que l'élasticité par rapport à la richesse immobilière est non significative dans la zone euro. En outre, la sensibilité de la consommation aux changements de l'effet richesse s'accroît pour des niveaux élevés du taux de croissance de la consommation. Au total, nos résultats suggèrent des relations entre la consommation et la richesse significativement différentes selon la distribution du taux de croissance de la consommation.

We investigate the determinants of the volatility of fiscal policy discretion. Using a linear dynamic panel dataset model for 104 countries from 1980 to 2006 and a system-GMM estimator,we find that more government instability, less democracy and presidentialist systems increase the volatility of the discretionary component of fiscal policy. Additionally, we show that countries with a larger size, a smaller degree of financial openness, and a stable exchange rate system are more insured against the uncertainty about the conduct of fiscal policy. Our results are robust to various regional dummy variables, diferent sub-sets of countries and the presence of high inflation and crisis episodes. ; The authors would like to thank the following for helpful comments: the Editor, two anonymous referees and participants at the 2009 Annual Meeting of the European Economic Association and the Econometric Society, the Economic Policies Research Unit (NIPE) seminar organised by the University of Minho, the First International Symposium in Computational Economics and Finance (ISCEF 2010), the 2010 Annual Meeting of the European Public Choice Society, the workshop on 'International Political Economy and Cross-Border Effects' organised by Queen Mary University of London and the UECE Conference on Economic and Financial Adjustments in ...

We assess the role played by scal policy in explaining the dynamics of asset markets. Using a panel of ten industrialized countries, we show that a positive scal shock has a negative impact in both stock and housing prices. However, while stock prices immediately adjust to the shock and the e¤ect of scal policy is temporary, housing prices gradually and persistently fall. As a result, the attempts of scal policy to mitigate stock price developments may severely de-stabilize housing markets. The empirical ndings also point to: (i) a contractionary e¤ect of scal policy on output in line with the existence of crowding-out e¤ects; (ii) a weakening of the e¤ectiveness of scal policy in recent times; (iii) signi cant scal multiplier e¤ects in the context of severe housing busts; and (iv) an increase of the sensitivity of asset prices to scal policy shocks following the process of nancial deregulation and mortgage liberalization. Finally, the evidence suggests that changes in equity prices may help governments towards consolidation of public nances. ; COMPETE; QREN; UE Fundo Europeu de Desenvolvimento Regional; Fundação para a Ciência e a Tecnologia ...

This paper investigates the short-term dynamics for public debts in the US and the UK over more than four decades. We check for structural changes in the data and assess nonlinearity and switching-regime hypotheses using several linearity tests. Our findings point to multiple structural breaks due to economic downturns, oil shocks, and financial and political instability. We also identify different regimes for which the adjustment is asymmetric and nonlinear, in particular, since 2003 and around the Great Recession. ; Fundação para a Ciência e a Tecnologia ...

ABSTRACTWe analyse the impact of fiscal policy on asset prices using a panel vector auto‐regressive (PVAR) approach and quarterly data for ten industrialized countries. We find that positive fiscal shocks lead to a temporary fall in stock prices and a gradual and persistent decrease in housing prices. The empirical findings also point to: (i) a contractionary effect of fiscal policy on output in line with the existence of crowding‐out effects and the deterioration of credit conditions; (ii) a weakening of the effectiveness of fiscal policy in recent times; (iii) a more persistent response of asset prices for countries with a lower degree of openness; (iv) a larger impact of fiscal policy on asset prices for small countries; (v) a close link between the responsiveness of asset prices to fiscal policy and the government's size; (vi) an increase of the sensitivity of asset prices to fiscal policy shocks following the process of financial deregulation and mortgage liberalization; and (vii) significant fiscal multiplier effects in the context of severe housing busts. Finally, the evidence suggests that changes in equity prices may help governments towards consolidation of public finances.

Résumé Nous étudions le rôle de la politique budgétaire pour expliquer la dynamique des marchés d'actifs. À l'aide d'un modèle de données de panel couvrant une dizaine de pays industrialisés, nous montrons qu'un choc budgétaire positif a un effet négatif sur les prix des actifs boursiers et immobiliers. Les premiers réagissent instantanément au choc et l'effet du choc est temporaire. Les prix des actifs immobiliers réagissent progressivement et l'effet du choc est persistant. Par conséquent, toute tentative de stabilisation des marchés immobiliers à l'aide de la politique budgétaire (par exemple à travers les taxes sur les revenus du capital) peut avoir l'effet opposé à celui recherché en déstabilisant ces marchés. Nous trouvons également des effets multiplicateurs significatifs dans les cas d'éclatement des bulles immobilières, ce qui peut justifier le recours à des plans de stabilisation à partir de l'outil de la fiscalité. Nous mettons également évidence des effets d'éviction des déficits budgétaires sur la consommation et l'investissement (à cause de la pression à la hausse exercée sur les taux d'intérêt). JEL Code: E62, H30