Graduation Year
2024
Date of Submission
4-2024
Document Type
Open Access Senior Thesis
Degree Name
Bachelor of Arts
Department
Economics
Reader 1
Richard C. K. Burdekin
Terms of Use & License Information
Rights Information
© 2024 Filippo Salvatico
Abstract
This paper studies the effects of Italy’s expenditure-focused fiscal policy on (1) economic output, measured with real GDP growth, and (2) stock market performance, measured with FTSE MIB period returns, using ordinary least squares and generalized autoregressive conditional heteroskedasticity models. To the first end, a quarterly (time series) data base of fiscal indicators—Budget Balance, Government Debt, and Government Expenditure—as well as other macroeconomic series is constructed to test their effects on output. To the second end, a monthly (time series) data base of the same indicators, as well as period returns for seven other benchmark stock exchanges across Europe, is constructed to test their effect of stock market perfromance. Based on OLS models, both Italian economic output and stock market returns are very strongly correlated with their Pan-European counterparts at 99% confidence intervals. When egressing the portion of the Italy’s real GDP growth not explained by European real GDP growth, Budget Balance—marginally—impacts economic output at 90% confidence interval, in that Budget Deficits are correlated with growth. When regessing the portion of FTSE MIB’s returns not explained by STOXX600’s returns, Government Debt is positively correlated with returns only when levels are one standard deviation above its mean. Based on the estimate from the GARCH model, FTSE MIB has a Beta of 1.131 in respect to STOXX 600.
Recommended Citation
Salvatico, Filippo, "The Effects of Spending-Focused Fiscal Policy on Italian Output and Stock Market Performance" (2024). CMC Senior Theses. 3593.
https://scholarship.claremont.edu/cmc_theses/3593
