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Private Sector Consumption Behavior and Non-Keynesian Effects of Fiscal Policy

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  • Rina Bhattacharya
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    Abstract

    This paper explores the hypothesis that the propensity to consume out of income is not constant but varies, perhaps in a nonlinear fashion, with fiscal variables. It examines whether there is any empirical evidence to support the hypothesis that households move from non-Ricardian to Ricardian behavior as government debt reaches high levels and as uncertainty about future taxes increases. The paper also examines the possibility of a relationship (along the lines of the Bertola-Drazen model) between the propensity to consume out of income and the government consumption-to-GDP ratio.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=3253
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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 99/112.

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    Length: 28
    Date of creation: 01 Aug 1999
    Date of revision:
    Handle: RePEc:imf:imfwpa:99/112

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    Related research

    Keywords: Private consumption; household income; government spending; permanent income; fiscal consolidation; fiscal variables; consumption function; fiscal deficit; public debt; fiscal policy; aggregate demand; consumption spending; tax increases; fiscal crises; real interest rate; fiscal adjustment; fiscal adjustments; public debt reverse; fiscal transfer; disposable income; tax cuts; permanent income hypothesis; fiscal surpluses; fiscal contractions; fiscal expansion; fiscal policy debt; budget constraint; consumption behavior; labor income; consumption coefficient; household budget; fiscal austerity; government expenditure; consumption functions; current income; fiscal deficits; current consumption; consumption path;

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    Cited by:
    1. António Afonso, 2001. "Non-Keynesian Effects of Fiscal Policy in the EU-15," Working Papers Department of Economics 2001/07, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
    2. Borys, Paweł & Ciżkowicz, Piotr & Rzońca, Andrzej, 2011. "Panel data evidence on non-Keynesian efects of fiscal policy in the EU New Member," MPRA Paper 32696, University Library of Munich, Germany.
    3. Johansson, Martin & Jönsson, Kristian, 2003. "Public debt and the effects of government expenditure on private consumption - A Kalman filter analysis of the Swedish experience 1970-1997," Working Papers 2003:3, Lund University, Department of Economics.

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