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New Evidence on the Private Saving Offset and Ricardian Equivalence


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  • Oliver Röhn


The ability of discretionary fiscal policy to affect economic activity following shocks depends on how private agents react. This paper re-investigates the extent of possible offsetting private saving behaviour to fiscal policy changes. The results suggest that the private saving offset is around 40% on average across countries in both the short and the long term, which is somewhat lower than found in prior research. However, the estimates vary considerably across countries. Disaggregate analyses of the budget components shows that changes in current revenues are almost fully offset, whereas offsets to current spending are on average around one third to one half depending on the sample. There is no offset for public investment, making it the most potent policy tool. Saving offsets are stronger the higher the level of government debt consistent with the expectation that snowballing debt may ultimately lead to higher taxation. They are also stronger the better developed financial markets are, pointing to the importance of liquidity constraints for the effectiveness of policy. Nouveaux éléments concernant l'effet compensatoire de l'épargne privée et l'équivalence ricardienne L’influence des mesures budgétaires discrétionnaires sur l’activité économique après un choc dépend de la réaction des agents économiques privés. Ce document réexamine, à partir de données allant jusqu’à 2008, l’ampleur d’un éventuel comportement compensatoire d’épargne du secteur privé face à l’évolution de la politique budgétaire. Les résultats montrent que l’effet compensatoire de l’épargne privée est de 40 % en moyenne dans les différents pays, soit un peu moins que la proportion découlant des recherches antérieures. Les estimations sont toutefois extrêmement variables d’un pays à l’autre. Une analyse désagrégée des composantes du budget fait apparaître que les variations des recettes courantes sont presque entièrement compensées, alors que pour les dépenses courantes, la compensation n’est qu’en moyenne d’un tiers à la moitié, en fonction de l’échantillon. Il n’y a pas d’effet compensatoire de l’investissement public, qui est donc l’instrument d’action le plus puissant. L’effet compensatoire de l’épargne est d’autant plus marqué que le niveau de la dette publique est plus élevé, ce qui est conforme à l’attente d’un assainissement ultérieur qui alourdira l’impôt. L’effet compensatoire est en outre d’autant plus prononcé que les marchés de capitaux sont plus développés, ce qui témoigne de l’importance des contraintes de liquidité pour l’efficacité des politiques.

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 762.

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Date of creation: 06 May 2010
Date of revision:
Handle: RePEc:oec:ecoaaa:762-en

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Keywords: private saving; asset prices; ricardian equivalence; fiscal policy; politique budgétaire; prix des actifs; épargne privée; équivalence ricardienne;

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Cited by:
  1. repec:cge:warwcg:102 is not listed on IDEAS
  2. Esposito, Piero & Paradiso, Antonio & Rao, B. Bhaskara, 2011. "The dynamics of French public debt: Paths for fiscal consolidations," MPRA Paper 32564, University Library of Munich, Germany.
  3. Nicholas Crafts & Terence C. Mills, 2012. "Rearmament to the Rescue? New Estimates of the Impact of ‘Keynesian’ Policies in 1930s’ Britain," Working Papers 0031, European Historical Economics Society (EHES).
  4. C. Kerdrain & V. Lapègue, 2011. "Restrictive Fiscal Policies in Europe: What are the Likely Effects?," Documents de Travail de la DESE - Working Papers of the DESE g2011-17, Institut National de la Statistique et des Etudes Economiques, DESE.
  5. repec:cge:warwcg:103 is not listed on IDEAS
  6. Clovis Kerdrain & Isabell Koske & Isabelle Wanner, 2010. "The Impact of Structural Policies on Saving, Investment and Current Accounts," OECD Economics Department Working Papers 815, OECD Publishing.
  7. Åsa Johansson & Yvan Guillemette & Fabrice Murtin & David Turner & Giuseppe Nicoletti & Christine de la Maisonneuve & Guillaume Bousquet & Francesca Spinelli, 2012. "Looking to 2060: Long-Term Global Growth Prospects: A Going for Growth Report," OECD Economic Policy Papers 3, OECD Publishing.
  8. Douglas Sutherland & Peter Hoeller & Rossana Merola, 2012. "Fiscal Consolidation: Part 1. How Much is Needed and How to Reduce Debt to a Prudent Level?," OECD Economics Department Working Papers 932, OECD Publishing.
  9. Esposito, Piero & Paradiso, Antonio & Rao, B. Bhaskara, 2011. "The dynamics of Spanish public debt and sustainable paths for fiscal consolidation," MPRA Paper 32563, University Library of Munich, Germany.
  10. Ricardo N. Bebczuk & Eduardo A. Cavallo, 2014. "Is Business Saving Really None of Our Business?," IDB Publications 85654, Inter-American Development Bank.


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