Liquidity Constrains and Ricardian Equivalence in Estonia
AbstractThis paper aims to find evidence of the influence of government deficit on private consumption in Estonia. The data only shows some support for Ricardian equivalence. Two approaches were used in the empirical tests. The Haque and Montiel (1989) equation of consumption was estimated using an instrumental variables technique. The Aschauer (1985) system of equations was estimated with the full information maximum likelihood method. Formal tests based on macro data could neither reject nor confirm the existence of liquidity constraints or Ricardian equivalence. There remains a lot of room for testing both of these hypotheses in Estonia. Further efforts to test liquidity constraints should concentrate on using micro data.
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Bibliographic InfoPaper provided by Bank of Estonia in its series Bank of Estonia Working Papers with number 2004-7.
Date of creation: 10 Oct 2004
Date of revision: 10 Oct 2004
Publication status: published
Postal: Estonia bld. 13, 15095 Tallinn, ESTONIA
Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-07-25 (All new papers)
- NEP-MAC-2005-07-25 (Macroeconomics)
- NEP-TRA-2005-07-25 (Transition Economics)
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