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Consumers Are Not Ricardian: Evidence from Nineteen Countries

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  • Evans, Paul

Abstract

The author develops a model that nests both Ricardian equivalence and an alternative non-Ricardian theory. The alternative is a stochastic variant of Blanchard's (1985) model and its empirical implications are derived. The author then tests Ricardian equivalence against this alternative using data from nineteen countries. Ricardian equivalence is resoundingly rejected. Moreover, the estimated deviation from Ricardian equivalence is roughly what one would expect if households faced perfect insurance markets and did not have altruistic bequest motives. For many purposes, however, the estimated deviation from Ricardian equivalence has no practical import. Copyright 1993 by Oxford University Press.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 31 (1993)
Issue (Month): 4 (October)
Pages: 534-48

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Handle: RePEc:oup:ecinqu:v:31:y:1993:i:4:p:534-48

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Cited by:
  1. 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.
  2. Hannes Kaadu & Lenno Uusküla, 2004. "Liquidity Constrains and Ricardian Equivalence in Estonia," Bank of Estonia Working Papers 2004-7, Bank of Estonia, revised 10 Oct 2004.
  3. Michel Normandin, 1996. "Budget Deficit Persistence and the Twin Deficits Hypothesis," Macroeconomics 9607001, EconWPA.
  4. Michel Normandin, 2006. "Fiscal Policies, External Deficits, and Budget Deficits," Cahiers de recherche 06-05, HEC Montréal, Institut d'économie appliquée.
  5. Brunila, Anne, 1996. "Fiscal Policy and Private Consumption – Saving Decisions: Evidence from Finland," Research Discussion Papers 28/1996, Bank of Finland.
  6. Douglas W. Elmendorf & N. Gregory Mankiw, 1998. "Government debt," Finance and Economics Discussion Series 1998-09, Board of Governors of the Federal Reserve System (U.S.).
    • Elmendorf, Douglas W. & Gregory Mankiw, N., 1999. "Government debt," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 25, pages 1615-1669 Elsevier.
  7. António Afonso, 2008. "Euler Testing Ricardo and Barro in the EUs," Working Papers Department of Economics 2008/23, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  8. Ghassan, Hassan B., 2003. "آثار عجز الميزانية على الإدخار الخاص في الإقتصاد المغربي عبر نمذجة التقهقر الذاتي البنيوي
    [Effects of Budget Deficit on P
    ," MPRA Paper 56435, University Library of Munich, Germany, revised 07 Feb 2004.
  9. Koumparoulis, Dimitrios, 2006. "Ευρωπαϊκή Δημοσιονομική Πολιτική Και Οικονομική Μεγέθυνση: Η Νεοκλασική Οικονομική Θεωρία Για Την Περίπτωσ�," MPRA Paper 44310, University Library of Munich, Germany.
  10. Daniel Mitchell, 2005. "Charles K. Rowley, William F. Shughart II, and Robert D. Tollison (Eds.), The economics of budget deficits. The International Library of Critical Writings in Economics 153, ed. by Mark Blaug. Cheltenh," Public Choice, Springer, vol. 122(3), pages 501-512, March.
  11. Maria I. Marika Santoro, 2009. "The CBO Infinite-Horizon Model with Idiosyncratic Uncertainty and Borrowing Constraints: Working Paper 2009-03," Working Papers 41375, Congressional Budget Office.
  12. repec:ebl:ecbull:v:5:y:2008:i:16:p:1-14 is not listed on IDEAS
  13. Himarios, Daniel, 1995. "Euler equation tests of Ricardian equivalence," Economics Letters, Elsevier, vol. 48(2), pages 165-171, May.
  14. António Afonso, 2001. "Government indebtedness and european consumers behaviour," Working Papers Department of Economics 2001/12, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.

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