Effects of Fiscal and Monetary Policy Shocks on the Performance of the Lima Stock Exchange
DOI:
https://doi.org/10.26867/Keywords:
Fiscal policy, Monetary policy, Stock market, VECMAbstract
The behavior of the stock market is regarded in many economies as a key indicator of economic activity. In light of past crises, it is crucial to assess whether the measures implemented by the government or by institutions responsible for maintaining economic stability were appropriate. Therefore, this study analyzes the effects of fiscal and monetary policy on the performance of the Lima Stock Exchange over the period 2003–2023. The research adopts a quantitative approach, with an explanatory scope and a non-experimental longitudinal design. Monthly frequency data were used, and the variables analyzed include public expenditure, taxes, the policy interest rate, and the general index of the Lima Stock Exchange. Regarding the estimations, a Vector Autoregressive (VAR) econometric model was employed, with a focus on Impulse Response Functions (IRFs). The results indicate that fiscal policy—through increases in public spending and taxation—has a negative impact on the general index of the Lima Stock Exchange. Similarly, the policy interest rate of the monetary authority also exerts a negative effect. It is concluded that these policies influence the performance of the Lima Stock Exchange in the short term.
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