Home | Events | The Signaling Effects of Fiscal Announcements

The Signaling Effects of Fiscal Announcements

  • Series
  • Speaker(s)
    Francesco Zanetti (University of Oxford, United Kingdom)
  • Field
  • Location
    Tinbergen Institute Amsterdam, room 1.01
  • Date and time

    October 26, 2023
    16:00 - 17:15


Fiscal announcements may transfer information about the government’s view of the
macroeconomic outlook to the private sector, diminishing the effectiveness of fiscal
policy as a stabilization tool. We construct a novel dataset that combines daily
data on Japanese stock prices with narrative records from press releases about a
set of extraordinary fiscal packages introduced by the Japanese government from
2011-2020. We use local projections to show that these fiscal stimuli were often
interpreted as negative news by the stock market whereas exogenous fiscal inter-
ventions that do not convey any information about the business cycle (e.g., the
successful bids to host the Olympics on September 8, 2013) fostered bullish reac-
tions. In addition, these negative effects on stock prices arose more commonly when
fiscal stimuli were announced against a backdrop of heightened macroeconomic un-
certainty. Both findings are shown to be consistent with the theory of signaling
effects. Joint paper with Leonardo Melosi, Hiroshi Morita, and Anna Rogantini Picco.

Link to paper.

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