Ricardian equivalence hypothesis: Evidence from Pakistan
AbstractThis paper provides empirical evidence on the soundness and relevance of the Ricardian equivalence hypothesis (REH) for Pakistan over the period 1960__2009. Time series properties have been examined in order to take care of the criticism made against the previous studies on REH notably model-specification, simultaneity bias and stationarity of data. Real income, real consumption, real government expenditure and real government revenue, though nonstationary, are not cointegrated. There is unidirectional causality from real income to real consumption, real government expenditure and real government revenue and from real government expenditure to real government revenue. We used impulse response functions to ascertain the impact of shocks of one variable upon others. The impact of real government expenditure and real government revenue on consumption is most notable and substantial that provides some support in favour of the REH. This happens in the short-run. Stabilization policies are adopted that aim at averting those shocks that harm the economy substantially in the short-run.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by E3 Journals in its journal E3 Journal of Business Management and Economics..
Volume (Year): 3 (2012)
Issue (Month): 6 ()
Contact details of provider:
Ricardian Equivalence; Granger-causality; Impulse Response Functions. JEL Classification: H3;
Find related papers by JEL classification:
- Imp - Health, Education, and Welfare - - - - -
- Res - Urban, Rural, Regional, Real Estate, and Transportation Economics - - - - -
- Fun - International Economics - - - - -
- JEL - Labor and Demographic Economics - - - - -
- Cla - Mathematical and Quantitative Methods - - - - -
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mackinnon, J.G. & Haug, A.A. & Michelis, L., 1996.
"Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration,"
96a09, Universite Aix-Marseille III.
- MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 563-77, Sept.-Oct.
- James G. MacKinnon & Alfred A. Haug & Leo Michelis, 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Working Papers 1996_07, York University, Department of Economics.
- Robert J. Barro, 1988.
"The Ricardian Approach to Budget Deficits,"
728, Queen's University, Department of Economics.
- Feldstein, Martin S, 1976. "Perceived Wealth in Bonds and Social Security: A Comment," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 331-36, April.
- Seater, John J, 1993. "Ricardian Equivalence," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 142-90, March.
- MacKinnon, James G, 1996.
"Numerical Distribution Functions for Unit Root and Cointegration Tests,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
- James G. MacKinnon, 1995. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Working Papers 918, Queen's University, Department of Economics.
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
- Feldstein, Martin & Elmendorf, Douglas W, 1990. "Government Debt, Government Spending, and Private Sector Behavior Revisited: Comment," American Economic Review, American Economic Association, vol. 80(3), pages 589-99, June.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
- Bayoumi, Tamim & Masson, Paul R, 1998.
"Liability-Creating Versus Non-Liability-Creating Fiscal Stabilization Policies: Ricardian Equivalence, Fiscal Stabilization and EMU,"
CEPR Discussion Papers
1984, C.E.P.R. Discussion Papers.
- Bayoumi, Tamim & Masson, Paul R, 1998. "Liability-Creating versus Non-liability-Creating Fiscal Stabilisation Policies: Ricardian Equivalence, Fiscal Stabilisation, and EMU," Economic Journal, Royal Economic Society, vol. 108(449), pages 1026-45, July.
- Evans, Paul, 1988. "Are Consumers Ricardian? Evidence for the United States," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 983-1004, October.
- Graham, Fred C & Himarios, Daniel, 1996. "Consumption, Wealth, and Finite Horizons: Tests of Ricardian Equivalence," Economic Inquiry, Western Economic Association International, vol. 34(3), pages 527-44, July.
- Khalid, Ahmed M., 1996. "Ricardian equivalence: Empirical evidence from developing economies," Journal of Development Economics, Elsevier, vol. 51(2), pages 413-432, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Andrew Godwin).
If references are entirely missing, you can add them using this form.