The Direct and Indirect Effects of Fiscal Policy on Stock Market in Developing Countries: A SVAR Model

Abstract

This study estimate the effects of Fiscal Policy on Stock Market using a Structural Vector Autoregressive with short-terms restricctions for Peru and Mexico in 2003q2 – 2018q2 and 1998q1 – 2018q2 periods respectively and we add a dummy variable for control the finincial crisis period. The results show that Fiscal Policy have positive impact on Stock Market in both countries with directs and indirect effects. Fiscal Policy affects the Monetary Policy for Mexico. And Monetary Policy haven’t direct effects on stock market in both countries.