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On the Substitutability between Private Consumer Expenditure and Government Spending in Canada

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  • Odysseus Katsaitis

Abstract

The purpose of this paper is twofold. First, to examine whether there is any substitutability between private consumer expendit ure and government spending in Canada. Second, to test the Ricardian equivalence principle. Both hypotheses are nested within the life-cyc le/rational-expectations model. The results indicate that the joint h ypothesis of rational expectations and Ricardian equivalence can not be rejected by the data. Moreover, they suggest that government spend ing substitutes poorly for private consumer expenditure. These result s imply that temporary increases in government spending will result i n an expansion of real output.

Suggested Citation

  • Odysseus Katsaitis, 1987. "On the Substitutability between Private Consumer Expenditure and Government Spending in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 20(3), pages 533-543, August.
  • Handle: RePEc:cje:issued:v:20:y:1987:i:3:p:533-43
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    Cited by:

    1. Normandin, Michel, 1999. "Budget deficit persistence and the twin deficits hypothesis," Journal of International Economics, Elsevier, vol. 49(1), pages 171-193, October.
    2. Khalid, Ahmed M., 1996. "Ricardian equivalence: Empirical evidence from developing economies," Journal of Development Economics, Elsevier, vol. 51(2), pages 413-432, December.
    3. CARDIA, Emanuela & KOZHAYA, Norma & RUGE-MURCIA, Francisco J., 1999. "Distortionary Taxation and Labor Supply: Evidence from Canada," Cahiers de recherche 9913, Universite de Montreal, Departement de sciences economiques.
    4. Kandil, Magda, 2001. "Asymmetry in the effects of us government spending shocks: evidence and implications," The Quarterly Review of Economics and Finance, Elsevier, vol. 41(2), pages 137-165.

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