Abstract

QUINTERO M, Washington; RODRIGUEZ NAVA, Abigail; PEREZ VASQUEZ, Liliam  and  LEON VILLAFUERTE, Domenica. Examining the influence of fiscal and monetary policies on firm market capitalization: a panel vector autoregressive (PVAR) analysis for Mexico. Desarro. soc. [online]. 2024, n.96, pp.121-145.  Epub Jan 01, 2024. ISSN 0120-3584.  https://doi.org/10.13043/dys.96.5.

Several studies have examined the relationship between monetary policy and the stock market. However, few have assessed the impact of fiscal management on this market. This paper examines the extent to which fiscal policy affects a firm’s stock market capitalization using the Panel Vector Autoregressive (PVAR) methodology. The study finds that the stock market capitalization in the CPI fully reflects the available information on the movements of variables related to monetary policy. However, total public indebtedness exerts a significant lagged effect on the stock market capitalization of Mexican firms. This finding indicates that the CPI does not fully reflect the available information on the movements of fiscal policy variables. A comprehensive analysis of fiscal policy measures can enhance stock market performance for investors and financial analysts.

Keywords : Government debt; economic policy uncertainty; Stock exchange; efficient market hypothesis; Mexico.

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