Fiscal policy

What is fiscal policy

Fiscal policy is a set of measures through which the state influences the economy via its budget, primarily the levels of revenue and spending.
Its goal is to regulate economic growth, employment, and inflation.

Unlike monetary policy, which is carried out by the central bank, fiscal policy is in the hands of the government and parliament.

The main instruments of fiscal policy

• Government spending — investments in infrastructure, education, defense, and social programs.
• Taxes — adjustments to tax rates for citizens and businesses.
• Subsidies and grants — support for selected sectors of the economy.
• Transfers — social benefits, pensions, unemployment support.

Types of fiscal policy

• Expansionary fiscal policy — increasing government spending and/or cutting taxes to support economic growth.
• Restrictive fiscal policy — cutting spending and/or raising taxes to reduce inflation or debt.
• Neutral fiscal policy — maintaining a balanced budget with stable growth.

Impact on investors

• Expansionary policy can boost demand for stocks thanks to rising consumption and corporate profits.
• Restrictive policy may slow economic growth in the short term but stabilizes the economy.
• Tax changes directly affect company profitability and household disposable income.

Fiscal policy on the Stonkee platform

On Stonkee you can track current government budgets, planned investments, and changes in tax policy. AI assesses how these moves affect individual sectors and suggests adjustments to the investment portfolio.

Summary

Fiscal policy is a key government tool for influencing the economy. For investors, it is important to monitor its direction because it has a direct impact on markets, corporate profits, and household purchasing power.