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Fiscal adjustments in Europe and Ricardian equivalence

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  • V. DE BONIS

    (Universita' degli Studi di Roma "La Sapienza")

  • R. PALADINI

    (Universita' degli Studi di Roma "La Sapienza")

Abstract

According to the ‘Ricardian’ equivalence hypothesis, consumption is dependent on permanent disposable income and current deficits are equivalent to future tax payments. This hypothesis is tested on 14 European countries in the 1990s. The relationships between private sector savings and general government deficit, and the GDP growth rate and the unemployment rate are determined. The results show the change in consumers' behaviour with respect to government deficit, and that expectations of an increase in future wealth are no longer associated with a decrease in deficit.

Suggested Citation

  • V. De Bonis & R. Paladini, 1998. "Fiscal adjustments in Europe and Ricardian equivalence," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 51(206), pages 247-272.
    • Handle: RePEc:psl:bnlqrr:1998:32
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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/10598/10482
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    References listed on IDEAS

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    Cited by:

    1. Mourao, Paulo & Rodrigues, Carlos, 2007. "Abordagens da despesa pública nos últimos vinte anos [Twenty years of Perspectives on Public Expenditures]," MPRA Paper 3416, University Library of Munich, Germany.
    2. Ant�nio Afonso, 2010. "Expansionary fiscal consolidations in Europe: new evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 17(2), pages 105-109, January.
    3. António Afonso, 2007. "Expansionary fiscal consolidations in Europe: part of conventional wisdom?," Money Macro and Finance (MMF) Research Group Conference 2006 50, Money Macro and Finance Research Group.

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    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts

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