On the Substitutability between Private Consumer Expenditure and Government Spending in Canada
AbstractThe purpose of this paper is twofold. First, to examine whether there is any substitutability between private consumer expendit ure and government spending in Canada. Second, to test the Ricardian equivalence principle. Both hypotheses are nested within the life-cyc le/rational-expectations model. The results indicate that the joint h ypothesis of rational expectations and Ricardian equivalence can not be rejected by the data. Moreover, they suggest that government spend ing substitutes poorly for private consumer expenditure. These result s imply that temporary increases in government spending will result i n an expansion of real output.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 20 (1987)
Issue (Month): 3 (August)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
Web page: http://economics.ca/cje/
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- Kandil, Magda, 2001. "Asymmetry in the effects of us government spending shocks: evidence and implications," The Quarterly Review of Economics and Finance, Elsevier, vol. 41(2), pages 137-165.
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