IDEAS home Printed from https://ideas.repec.org/a/ksp/journ5/v4y2017i3p372-381.html
   My bibliography  Save this article

Fiscal policy and the Ricardian equivalence: Empirical evidence from Morocco

Author

Listed:
  • Mouna MARZOUK

    () (Mohammed V University of Rabat, Faculty of Economics & Law, Applied Economics Lab., Morocco.)

  • Youssef OUKHALLOU

    () (Mohammed V University of Rabat, Faculty of Economics & Law, Applied Economics Lab., Morocco.)

Abstract

This paper empirically investigates the validity of the Ricardian equivalence hypothesis in Morocco, based on recent data (1980-2016) that encompasses interesting episodes of demand-oriented expansionary government policy during the second half of the 2000s, followed by significant restrictive fiscal measures starting from 2012. We use the SVAR methodology, which enables us to make the difference between the dynamics of savings and the budget deficit by separating them into two types of shocks. Our results suggest that the equivalence is verified in the Moroccan macroeconomic framework. The paper concludes that national savings offset up to 76% of fiscal deficit shocks.

Suggested Citation

  • Mouna MARZOUK & Youssef OUKHALLOU, 2017. "Fiscal policy and the Ricardian equivalence: Empirical evidence from Morocco," Journal of Economics Library, KSP Journals, vol. 4(3), pages 372-381, September.
  • Handle: RePEc:ksp:journ5:v:4:y:2017:i:3:p:372-381
    as

    Download full text from publisher

    File URL: http://www.kspjournals.org/index.php/JEL/article/download/1397/1412
    Download Restriction: no

    File URL: http://www.kspjournals.org/index.php/JEL/article/view/1397
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Artidiatun Adji & James Alm, 2016. "Testing for Ricardian Equivalence in Indonesia," Working Papers 1616, Tulane University, Department of Economics.
    2. Wilcox, David W, 1989. "The Sustainability of Government Deficits: Implications of the Present-Value Borrowing Constraint," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(3), pages 291-306, August.
    3. Aschauer, David Alan, 1985. "Fiscal Policy and Aggregate Demand," American Economic Review, American Economic Association, vol. 75(1), pages 117-127, March.
    4. Feldstein, Martin, 1982. "Government deficits and aggregate demand," Journal of Monetary Economics, Elsevier, vol. 9(1), pages 1-20.
    5. Youssef OUKHALLOU & Abla MRABTI, 2017. "A Small Scale Macroeconomic Model for Morocco," Journal of Economics and Political Economy, KSP Journals, vol. 4(2), pages 159-177, June.
    6. Modigliani, Franco & Sterling, Arlie G, 1990. "Government Debt, Government Spending, and Private Sector Behavior: A Further Comment," American Economic Review, American Economic Association, vol. 80(3), pages 600-603, June.
    7. Youssef OUKHALLOU, 2016. "Analyzing Economic Growth: What Role for Public Investment?," Journal of Economics Bibliography, KSP Journals, vol. 3(1), pages 71-99, March.
    8. Muhammad Afzal, 2012. "Ricardian equivalence hypothesis: Evidence from Pakistan," E3 Journal of Business Management and Economics., E3 Journals, vol. 3(6), pages 258-265.
    9. Haug, Alfred A., 2016. "A New Test of Ricardian Equivalence Using the Narrative Record on Tax Changes," MPRA Paper 75452, University Library of Munich, Germany.
    10. Kormendi, Roger C, 1983. "Government Debt, Government Spending, and Private Sector Behavior," American Economic Review, American Economic Association, vol. 73(5), pages 994-1010, December.
    11. Oukhallou, Youssef, 2016. "Analyzing economic growth: what role for public investment?," MPRA Paper 69772, University Library of Munich, Germany.
    12. GHASSAN, Hassan, 2007. "Does The Constraint In The Matrix Of Long Run Effects Bias The Ricardian Equivalence Test?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 7(1).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Elmendorf, Douglas W. & Gregory Mankiw, N., 1999. "Government debt," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 25, pages 1615-1669, Elsevier.
    2. Brunila, Anne, 1997. "Current income and private consumption : Saving decisions : Testing the finite horizon model," Research Discussion Papers 6/1997, Bank of Finland.
    3. Waqas, Muhamad & Awan, Masood Sarwar & Aslam, Muhammad Amir, 2011. "We are living on the cost of our children," MPRA Paper 32044, University Library of Munich, Germany.
    4. Hrushikesh Mallick, 2008. "Do remittances impact the economy? Some empirical evidences from a developing economy," Centre for Development Studies, Trivendrum Working Papers 407, Centre for Development Studies, Trivendrum, India.
    5. Lorenzo Pozzi, 2003. "Tax Discounting in a High‐debt Economy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(3), pages 261-282, July.
    6. Ni, Shawn, 1995. "An empirical analysis on the substitutability between private consumption and government purchases," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 593-605, December.
    7. Carlos Vieira, 2004. "The Deficit?Interest Rate Connection: an empirical assessment of the EU," Economics Working Papers 5_2004, University of Évora, Department of Economics (Portugal).
    8. Hafedh Bouakez & Nooman Rebei, 2007. "Why does private consumption rise after a government spending shock?," Canadian Journal of Economics, Canadian Economics Association, vol. 40(3), pages 954-979, August.
    9. Bilgili, Faik, 1999. "Yeni Klasik kurama göre bütçe politikalarının değerlendirilmesi [An evaluation of New Classical arguments on budget policies]," MPRA Paper 80771, University Library of Munich, Germany.
    10. David Alan Aschauer, 1990. "Is Government Spending Stimulative?," Contemporary Economic Policy, Western Economic Association International, vol. 8(4), pages 30-46, October.
    11. Malley Jim & Molana Hassan, 2002. "Fiscal Policy And The Composition Of Private Consumption: Some Evidence From The U.A. And Canada," International Economic Journal, Taylor & Francis Journals, vol. 16(1), pages 139-158.
    12. Basil Dalamagas, 1994. "Testing the Debt-Illusion Hypothesis," Revue Économique, Programme National Persée, vol. 45(4), pages 1079-1094.
    13. Aqdas Ali Kazmi, 1994. "Private Consumption, Government Spending, Debt Neutrality: Resolving Kormendi- Feldstein-Modigliani Controversy," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 33(4), pages 1055-1071.
    14. Sharon J. Erenburg, "undated". "Linking Public Capital to Economic Performance, Public Capital: The Missing Link Between Investment and Economic Growth ," Economics Public Policy Brief Archive 14, Levy Economics Institute.
    15. Artidiatun Adji & James Alm, 2016. "Testing for Ricardian Equivalence in Indonesia," Working Papers 1616, Tulane University, Department of Economics.
    16. Gochoco, Maria Socorro H., 1988. "Financing the Budget Deficit in a Small Open Economy: The Case of the Philippines, 1981-1986," Working Papers WP 1988-10, Philippine Institute for Development Studies.
    17. Leiderman, Leonardo & Razin, Assaf, 1988. "Testing Ricardian Neutrality with an Intertemporal Stochastic Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(1), pages 1-21, February.
    18. Fiorito, Riccardo & Kollintzas, Tryphon, 2004. "Public goods, merit goods, and the relation between private and government consumption," European Economic Review, Elsevier, vol. 48(6), pages 1367-1398, December.
    19. Becker, Torbjörn, 1995. "Budget Deficits, Tax Risk and Consumption," SSE/EFI Working Paper Series in Economics and Finance 74, Stockholm School of Economics.
    20. Ghatak, Anita & Ghatak, Subrata, 1996. "Budgetary deficits and Ricardian equivalence: The case of India, 1950-1986," Journal of Public Economics, Elsevier, vol. 60(2), pages 267-282, May.

    More about this item

    Keywords

    Fiscal deficit; National savings; Ricardian equivalence; SVAR model.;
    All these keywords.

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ksp:journ5:v:4:y:2017:i:3:p:372-381. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bilal KARGI). General contact details of provider: http://www.kspjournals.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.