Is the Ricardian Equivalence Proposition an 'Aerie Fairy' Theory for Europe?
AbstractUsing a theoretical model based on dynamic optimizing agents, we test empirically the Ricardian equivalence proposition (REP) for the EU-15 countries. The theoretical setting allows us to obtain estimates of the structural parameters of the model and to test directly the hypothesis implied by the REP. Using recently developed end-of-sample cointegration breakdown tests, we find evidence of a change in the fiscal behaviour of individuals during the last decade-after the introduction of a fiscal rule, namely the Maastricht criteria-for most countries in the sample. The results concerning the direction of change are mixed. Copyright (c) The London School of Economics and Political Science 2007.
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Bibliographic InfoArticle provided by London School of Economics and Political Science in its journal Economica.
Volume (Year): 74 (2007)
Issue (Month): 296 (November)
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- repec:ebl:ecbull:v:5:y:2004:i:16:p:1-10 is not listed on IDEAS
- Daniel Choi & Mark Holmes, 2014. "Budget deficits and real interest rates: a regime-switching reflection on Ricardian Equivalence," Journal of Economics and Finance, Springer, vol. 38(1), pages 71-83, January.
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