Deficits and Interest Rates as Evidence of Ricardian Equivalence
A number of empirical studies have failed to find a significant relationship between deficits and interest rates. This "non-finding" has become something of a stylized fact among many economists and is often cited as evidence of the validity of the Ricardian equivalence theorem. In this paper we show that estimates of reduced-form interest rate equations do not provide direct information about structural parameters that might reveal Ricardian equivalence. As a result, an insignificant relationship between deficits and interest rates is only a necessary, not a sufficient, condition for Ricardian equivalence.
Volume (Year): 21 (1995)
Issue (Month): 1 (Winter)
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