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U. S. Fiscal Policy And Asset Prices: The Role Of Partisan Conflict, Rangan Gupta, Chi Keung Marco Lau, Stephen M. Miller, Mark E. Wohar

Economics Faculty Publications

Fiscal policy shocks exert wide-reaching effects, including movements in asset markets. US politics have been characterized historically by a high degree of partisan conflict. The combination of increasing polarization and divided government leads not only to significant Congressional gridlock, but also to spells of high fiscal policy uncertainty. This paper adds to the literature on the relationships between fiscal policy and asset prices in the US economy conditional on the degree of partisan conflict. We analyze whether a higher degree of partisan conflict (legislative gridlock) reduces the efficacy of the effect and response of fiscal policy on and to asset …