search query: @journal_id 1759 / total: 47
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| Author: | Eschenbach, F. Schuknecht, L. |
| Title: | Budgetary risks from real estate and stock markets |
| Journal: | Economic Policy
2004 : OCT, 39, p. 313-346 |
| Index terms: | Finance Taxation Public sector Stock markets Property Budgeting Risk United Kingdom Sweden OECD |
| Language: | eng |
| Abstract: | Fiscal revenues and government expenditures are affected by asset price changes in ways that are not accounted for by standard cyclical-adjustment methods. Revenues are influenced by capital gains and turnover taxation, as well as by output changes. This study points out that these effects can be asymmetric, resulting in deficit and debt biases, and the study finds support for this phenomenon in panel estimates for a sample of 20 industrialized countries over 1982-2002. The estimated coefficients indicate that 30-40 percent of the dramatic early 1990s fiscal balance deteriorations in the U.K. and Sweden was due to asset price effects, with a particularly relevant role for real estate price changes. If financial markets experience boom-bust cycles, prudent management of fiscal windfalls in boom phases is needed to ensure fiscal and financial sustainability in bust phases, and budgetary rules may need to account explicitly for a separate role of asset price-related effects. |
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