Fiscal policy and stock market returns volatility: the case of Indonesia Online publication date: Mon, 03-Jul-2017
by Haryo Kuncoro
International Journal of Economic Policy in Emerging Economies (IJEPEE), Vol. 10, No. 2, 2017
Abstract: This paper separately studies the impact of different kind of fiscal policy on the stock return stabilisation in the case of Indonesia. Using quarterly data over the period 2001-2013, we obtained that the discretionary and automatic stabilisation fiscal policy tend to induce the stock returns volatility. While the credible debt rule policy leads to decrease the volatility of stock returns, the deficit rule policy is found to be non-credible and does not have any effect. Accordingly, the lower ratio of government expenditure to GDP along with improving commitment tightly to the planned deficit ratio is a good signal for stabilising financial market.
Online publication date: Mon, 03-Jul-2017
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