IDEAS home Printed from https://ideas.repec.org/a/rej/journl/v15y2012i46p249-269.html
   My bibliography  Save this article

Exchange Rate, Interest Rate and Ricardian Equivalence Evidence from Pakistan

Author

Listed:
  • Muhammad Waqas

    (Department of Economics, University of Sargodha, Pakistan)

  • Masood Sarwar Awan

    (Department of Economics, University of Sargodha, Pakistan)

Abstract

The aim of this study is to investigate the validity of Ricardian Equivalence Hypothesis in Pakistan by using annual data from 1973-2010. In our previous studies we investigated the Ricardian Equivalence Hypothesis and its sources of deviation in Pakistan by using Structural Consumption function and Euler Equation approach. The present study investigated this hypothesis in terms of rate of interest and exchange rate. Results of Auto Regressive Distributed Lag cointegration investigate the long run relationship among variables. By using OLS technique this study rejected Ricardian Equivalence Hypothesis in case of Pakistan. The findings of the study demonstrate the focus towards the significance of fiscal policies in raising private consumption and controlling budget deficits.

Suggested Citation

  • Muhammad Waqas & Masood Sarwar Awan, 2012. "Exchange Rate, Interest Rate and Ricardian Equivalence Evidence from Pakistan," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 0(SS), pages 249-269.
    • Handle: RePEc:rej:journl:v:15:y:2012:i:46:p:249-269
    as

    Download full text from publisher

    File URL: http://www.rejournal.eu/sites/rejournal.versatech.ro/files/articole/2012-11-30/1998/waqas.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Evans, Paul, 2001. "Consumer Behavior in the United States: Implications for Social Security Reform," Economic Inquiry, Western Economic Association International, vol. 39(4), pages 568-582, October.
    2. 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.
    3. Nicholas Apergis & Katerina Lyroudi & Athanasios Sfetsos, 2008. "Private And Government Consumption In Transitional Economies: A Panel Data Analysis," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 33(1), pages 113-131, June.
    4. Karl Whelan, 1991. "Ricardian equivalence and the Irish consumption function : the evidence re-examined," Open Access publications 10197/215, School of Economics, University College Dublin.
    5. Carlos Fonseca Marinheiro, "undated". "Ricardian Equivalence: An Empirical Application to the Portuguese Economy," International Economics Working Papers Series ces0112, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, International Economics.
    6. Yoopi Abimanyu, 1998. "Using Indonesia's Real Exchange Rate to Test Ricardian Equivalence," International Economic Journal, Taylor & Francis Journals, vol. 12(3), pages 17-29.
    7. Kostas Drakos, 2001. "Testing the Ricardian Equivalence Theorem: Time Series Evidence from Greece," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 26(1), pages 149-160, June.
    8. Graham, Fred C, 1993. "Fiscal Policy and Aggregate Demand: Comment," American Economic Review, American Economic Association, vol. 83(3), pages 659-666, June.
    9. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zia-Ur- Rahman, 2019. "Influence of Excessive Expenditure of the Government in Perspective of Interest Rate and Money Circulation Which in Turn Affects the Growing Process in Pakistan," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 6(2), pages 120-129.

    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. Waqas, Muhammad & Awan, Masood Sarwar, 2011. "Are Pakistani Consumers Ricardian?," MPRA Paper 35375, University Library of Munich, Germany.
    2. 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.
    3. Saima Sarwar, 2015. "Revisiting Ricardian Equivalence Hypothesis (REH) For Pakistan Using Money Demand Function Approach," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 4(3), pages 154-166.
    4. Cosimo Magazzino, 2012. "Fiscal Policy, Consumption and Current Account in the European Countries," Economics Bulletin, AccessEcon, vol. 32(2), pages 1330-1344.
    5. Brunila, Anne, 1996. "Fiscal policy and private consumption: Saving decisions: Evidence from Finland," Bank of Finland Research Discussion Papers 28/1996, Bank of Finland.
    6. repec:zbw:bofrdp:1996_028 is not listed on IDEAS
    7. Tomas Wroblowsky, 2007. "Explaining the Variability of Debt Neutrality Tests Results: A Meta-Analysis of Ricardian Equivalence," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 5(1), pages 7-24.
    8. Brunila, Anne, 1996. "Fiscal policy and private consumption : Saving decisions : Evidence from Finland," Research Discussion Papers 28/1996, Bank of Finland.
    9. Brunila, Anne, 1997. "Current income and private consumption : Saving decisions : Testing the finite horizon model," Research Discussion Papers 6/1997, Bank of Finland.
    10. repec:zbw:bofrdp:1997_006 is not listed on IDEAS
    11. António Afonso, 2001. "Government indebtedness and european consumers behaviour," Working Papers Department of Economics 2001/12, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    12. International Monetary Fund, 2005. "Norway: Selected Issues," IMF Staff Country Reports 2005/197, International Monetary Fund.
    13. Yoichi Matsubayashi & Takao Fujii, 2012. "Substitutability of Savings by Sectors: OECD Experiences," Discussion Papers 1215, Graduate School of Economics, Kobe University.
    14. Brunila, Anne, 1997. "Current income and private consumption: Saving decisions: Testing the finite horizon model," Bank of Finland Research Discussion Papers 6/1997, Bank of Finland.
    15. repec:ebl:ecbull:v:5:y:2004:i:16:p:1-10 is not listed on IDEAS
    16. L. Marattin & S. Salotti, 2009. "The Response of Private Consumption to Different Public Spending Categories: VAR Evidence from UK," Working Papers 670, Dipartimento Scienze Economiche, Universita' di Bologna.
    17. Kitchen, John & Orden, David, 1991. "Effects of Fiscal Policy on Agriculture and the Rural Economy," Staff Reports 278556, United States Department of Agriculture, Economic Research Service.
    18. Morgenroth, Edgar & FitzGerald, John & FitzGerald, John, 2006. "Summary and Conclusions," Book Chapters, in: Morgenroth, Edgar (ed.),Ex-Ante Evaluation of the Investment Priorities for the National Development Plan 2007-2013, chapter 24, pages 317-333, Economic and Social Research Institute (ESRI).
      • Baker, Terence J. & FitzGerald, John & Honohan, Patrick & FitzGerald, John & Honohan, Patrick, 1996. "Summary and Conclusions," Book Chapters, in: Baker, Terence J. (ed.),Economic Implications for Ireland of EMU, chapter 12, pages 339-352, Economic and Social Research Institute (ESRI).
    19. Jerome Creel, 1998. "L'assainissement budgétaire au Danemark entre 1983 et 1986 : l'anti-mythe (in French)," Documents de Travail de l'OFCE 1998-02, Observatoire Francais des Conjonctures Economiques (OFCE).
    20. Philippe Aghion & Matias Braun & Johannes Fedderke, 2008. "Competition and productivity growth in South Africa," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(4), pages 741-768, October.
    21. Athanasopoulos, George & de Carvalho Guillén, Osmani Teixeira & Issler, João Victor & Vahid, Farshid, 2011. "Model selection, estimation and forecasting in VAR models with short-run and long-run restrictions," Journal of Econometrics, Elsevier, vol. 164(1), pages 116-129, September.
    22. Imadeddin Ahmed Almosabbeh, 2020. "Is the Relationship Between Government Spending and Private Consumption in Egypt Symmetric?," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 14(3), pages 285-308, August.
    23. 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.

    More about this item

    Keywords

    Ricardian Equivalence Hypothesis; Exchange Rate; Pakistan;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

    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:rej:journl:v:15:y:2012:i:46:p:249-269. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Radu Lupu (email available below). General contact details of provider: https://edirc.repec.org/data/frasero.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.