What are the effects of fiscal policy on asset markets?

► We investigate the link between fiscal policy shocks and asset markets. ► Spending shocks have a positive effect on housing prices and a negative effect on stock prices. ► Fiscal shocks play a minor role in the U.S. and Germany. ► Fiscal shocks amplify the variability of housing and stock prices in the U.K. ► Government revenue shocks have increased volatility in Italy.