Prague Economic Papers 2005, 14(2):109-116 | DOI: 10.18267/j.pep.256

Effects of Macroeconomic Policies and Stock Market Performance on the Estonian Economy

Yu Hsing
Department of General Business, SLU 10813, College of Business and Technology, Southeastern Louisiana University, Hammond, LA 70402, U.S.A (e-mail: yhsing@selu.edu).

Based on a general equilibrium model, this study finds that real output in Estonia is positively associated with real quantity of money and negatively influenced by real depreciation of the kroon, real stock prices, and the expected inflation rate. Government deficit spending is found to be insignificant. Policy implications are that fiscal discipline pursued by the Estonian government is appropriate, that a stronger currency may better serve Estonia, and that the wealth effect of an increase in the stock price on real money balances is greater than the substitution effect.

Keywords: deficit spending, real depreciation, stock prices, wealth effect, substitution effect
JEL classification: E5, E6, O52, P24

Published: January 1, 2005  Show citation

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Hsing, Y. (2005). Effects of Macroeconomic Policies and Stock Market Performance on the Estonian Economy. Prague Economic Papers, 14(2), 109-116. doi: 10.18267/j.pep.256
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