A test of Ricardian Equivalence and public debt neutrality
AbstractBy virtue of the Ricardian Equivalence (RE) proposition, government bonds do not represent net wealth. Therefore, household's savings will increase to offset the government policy. The paper econometrically tests if governments bonds do represent net wealth based on the time series macrodata from India spanning a time from 1990 to 2005. While doing this, the paper explores the dynamic link between domestic government borrowing and private sector savings within a possibly co-integrated system where the joint endogeneity of the variables is allowed.
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Bibliographic InfoArticle provided by Inderscience Enterprises Ltd in its journal Int. J. of Monetary Economics and Finance.
Volume (Year): 3 (2010)
Issue (Month): 3 ()
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Web page: http://www.inderscience.com/browse/index.php?journalID=218
co-integrated systems; co-integration; ADF; augmented Dickeyâ€“Fuller test; endogeneity; Ricardian equivalence proposition; household savings; government policy; government bonds; net wealth; time series; India; domestic government borrowing; private sector savings.;
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