Is the Ricardian Equivalence Proposition an 'Aerie Fairy' Theory for Europe?
Using a theoretical model based on dynamic optimizing agents, we test empirically the Ricardian equivalence proposition (REP) for the EU-15 countries. The theoretical setting allows us to obtain estimates of the structural parameters of the model and to test directly the hypothesis implied by the REP. Using recently developed end-of-sample cointegration breakdown tests, we find evidence of a change in the fiscal behaviour of individuals during the last decade-after the introduction of a fiscal rule, namely the Maastricht criteria-for most countries in the sample. The results concerning the direction of change are mixed. Copyright (c) The London School of Economics and Political Science 2007.
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Volume (Year): 74 (2007)
Issue (Month): 296 (November)
Pages: 682-694
| Handle: | RePEc:bla:econom:v:74:y:2007:i:296:p:682-694 |
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