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Ricardian Equivalence Hypothesis in the Sub-Sahara African Countries

Author

Listed:
  • Becker Pickson, Robert

    (Sichuan Agricultural University)

  • Ofori-Abebrese, Grace

    (Kwame Nkrumah University of Science and Technology,)

Abstract

The validity of the Ricardian equivalence proposition remains disputed in spite of the numerous empirical work. This study utilized panel ARDL estimation approach to investigate the evidence of Ricardian Equivalence Hypothesis in five Sub-Sahara African countries, namely Botswana, Ghana, Gambia, Nigeria, and Kenya over the period of 1981~2014. Our results show that GDP per capita and interest rate have significant positive impacts on private consumption, whereas government debt, government spending, government interest payment on the outstanding debt have negative impacts on private consumption. Ricardian equivalence hypothesis, which states that private consumption remains unchanged regardless of government’s spending, does not hold in Sub-Sahara African countries.

Suggested Citation

  • Becker Pickson, Robert & Ofori-Abebrese, Grace, 2018. "Ricardian Equivalence Hypothesis in the Sub-Sahara African Countries," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 33(3), pages 466-487.
    • Handle: RePEc:ris:integr:0749
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    Cited by:

    1. Raymond Osi Alenoghena & Justin Amase & Adolphus Arhotomhenla Aghughu, 2022. "The Threshold Effect of Domestic Public Borrowing on the Nigerian Economy," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(5), pages 824-833, May.

    More about this item

    Keywords

    Ricardian equivalence; Interest rate; Government debt; Government spending; Government debt interest payments; Inflation;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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