Dynamic Impact of Fiscal and Monetary Policy Instruments on Merger and Acquisition Activities: Evidence from the USA Using an ARDL Model

Abstract

This study examines how fiscal and monetary policy tools influence merger and acquisition (M&A) activity in the United States. It employs an Autoregressive Distributed Lag (ARDL) model to assess both short-term and long-term effects using quarterly data from 1985 to 2023. The model considers taxes and public debt as proxies for fiscal policy, and interest rates and the money supply as proxies for monetary policy. Control variables include gross domestic product (GDP), inflation, and the regulatory uncertainty index.
The results indicate strong long-term relationships: the money supply positively affects M&A activity, while public debt and interest rates have negative correlations. In the short term, regulatory uncertainty and GDP volatility significantly impact M&A trends.