This paper investigates the effect of commercial, residential property and equity price volatility on the variability of cyclically adjusted government revenue. We find significant evidence that asset price volatility increases the variability of government revenue. A 1 percent increase in...

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...

This paper examines the effect of asset price volatility on fiscal policy stance. We find that asset price volatility affects the volatility of discretionary fiscal policy in a positive and significant manner, which according to Fatas and Mihov (2003) has negative repercussions on output...

The recent financial crisis was characterized by the sizeable fiscal cost of banking sector bail out operations and the significant automatic and discretionary fiscal policy response to shrinking output, which have put increased pressure on public finances in many industrialized countries. This...

This paper estimates a fiscal policy reaction function in order to investigate the links between financial and real estate market movements and fiscal policy outcomes. An increase in asset prices affects in a positive and significant manner primary balances, with the response reflecting both an...

This paper investigates the widely held view that expansionary fiscal policy can boost consumer and business confidence, which will stimulate private spending and sustain economic activity. We find evidence in favor of this conjecture, i.e., cuts in direct taxes generate a positive effect on...