Document Type

Article

Publication Date

3-14-2018

Publication Title

International Review of Finance

Publisher

Wiley-Blackwell

First page number:

1

Last page number:

12

Abstract

Fiscal policy shocks exert wide-reaching effects, including movements in asset markets. US politics have been characterized historically by a high degree of partisan conflict. The combination of increasing polarization and divided government leads not only to significant Congressional gridlock, but also to spells of high fiscal policy uncertainty. This paper adds to the literature on the relationships between fiscal policy and asset prices in the US economy conditional on the degree of partisan conflict. We analyze whether a higher degree of partisan conflict (legislative gridlock) reduces the efficacy of the effect and response of fiscal policy on and to asset price movements, respectively. We find that partisan conflict does not significantly affect the relationships between the fiscal surplus to gross domestic product (GDP) and housing and equity returns. Rather, if important, partisan conflict affects the actual implementation of fiscal policy actions. © 2018 International Review of Finance Ltd.

Disciplines

Economic Policy | Economics

File Format

pdf

File Size

694 Kb

Language

English

Comments

"This is the peer reviewed version of the following article:

Gupta, R., Lau, C. K. M., Miller, S. M., & Wohar, M. E. (2017). US fiscal policy and asset prices: The role of partisan conflict. International Review of Finance.

, which has been published in final form at 10.1111/irfi.12188. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions."


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