We analyse Ricardian Equivalence in open economy using a panel of 18 developed countries for 1973-1998. We use a dynamic panel estimated via instrumental variables and we discuss why this specification should be preferred to a static model estimated via ordinary least squares. We find a significant effect of the budget balance on the current account, mostly in its current value, suggesting that Ricardian Equivalence does not hold.
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Paper provided by ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY) in its series ISAE Working Papers with number
59.
Find related papers by JEL classification: F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics 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