This paper investigates the relationship between fiscal expenditure on health care (FE) and the pharmaceutical industry stock index (SP) by using full-sample and sub-sample rolling-window bootstrap causality tests. It can be observed that there is both a positive and negative relationship between FE and SP. FE will promote the rise of the pharmaceutical stock market, which proves the Keynesian theory, while the result that FE negatively affects SP supports the classical theory. In turn, SP positively impacts FE, which indicates that the development of the pharmaceutical industry and the increase in medical and health expenditures can promote each other. In addition, the negative influence of SP on FE suggests that the impact of the pharmaceutical index on fiscal expenditure needs to be judged in conjunction with other events and market conditions. In complex economic conditions, investors can rationally consider the industry situation of the pharmaceutical market and benefit by optimising their investment portfolios. The government can regulate and guide the pharmaceutical industry by adjusting the fiscal expenditure on health care, thereby promoting the sustainable and stable development of the financial market.
Keywords: causal relationship; medical and health fiscal expenditure; pharmaceutical industry; time-varying.