Nexus between Fiscal Performance and Stock Market: Does Institutional Quality Matter?

Abstract

This study analyses the relationship between the stock market and fiscal performance by adding the moderating role of institutional quality in the nexus between fiscal performance and the stock market in advanced countries. The study employs panel data of advanced countries with the span of 2007-2021 using the Generalized method of moments(GMM). The results find that fiscal performance plays a major role in determining the stock market returns, more over institutional quality further enhancing the relationship between fiscal performance and the stock market. This study contributes to ongoing literature by providing new evidence on the moderating role of institutional quality in the nexus between fiscal performance and the stock market.