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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- Waqas, Muhammad & Awan, Masood Sarwar, 2011. "Are Pakistani Consumers Ricardian?," MPRA Paper 35375, University Library of Munich, Germany.
- Aristovnik, Aleksander & Djurić, Sandra, 2010. "Twin deficits and the Feldstein-Horioka puzzle: a comparison of the EU member states and candidate countries," MPRA Paper 24149, University Library of Munich, Germany.
- 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.
- Waqas, Muhamad & Awan, Masood Sarwar & Aslam, Muhammad Amir, 2011. "We are living on the cost of our children," MPRA Paper 32044, University Library of Munich, Germany.
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