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Boniface Yemba, Yi Duan and Nabaneeta Biswas
 
''Government spending news and stock price index''
( 2023, Vol. 43 No.4 )
 
 
In this paper, we investigate the effects of US federal spending news on the S&P 500 stock price index. Unlike previous studies, we model news based on actual spending bills signed by the US President and focus on a period of important spending changes in US history (January 2000 - December 2022). Using a Mixed Frequency Time-Varying Parameters Factor Augmented Vector Autoregressive (MF-TVP-FAVAR) model, we find a negative impact of spending news shock on the S&P 500 index. We ascertain the robustness of our result using the Nasdaq and Dow Jones stock price indices as well as estimates from a Bayesian VAR model.
 
 
Keywords: Spending News, Stock Price Index, FAVAR, Mixed frequencies
JEL: C2 - Single Equation Models; Single Variables: General
E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
 
Manuscript Received : Aug 25 2023 Manuscript Accepted : Dec 30 2023

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