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Are consumers Ricardian when some are liquidity constrained? Evidence for the United States

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  • Duane Rockerbie

Abstract

This paper formulates and estimates a revised specification of Evans' (1988) test for Ricardian equivalence which incorporates the possible presence of liquidity constrained consumers. If liquidity constrained consumers are significant in number, tests using aggregate consumption data may tend to reject the Ricardian equivalence hypothesis when the model allows for liquidity constraints. A test which incorporated liquidity constrained consumers could not reject Ricardian equivalence over the sample period 1946-91. While the proportion of aggregate consumption which is liquidity constrained is found to be significant, it does not appear large enough to affect the test for Ricardian equivalence.

Suggested Citation

  • Duane Rockerbie, 1997. "Are consumers Ricardian when some are liquidity constrained? Evidence for the United States," Applied Economics, Taylor & Francis Journals, vol. 29(6), pages 821-827.
  • Handle: RePEc:taf:applec:v:29:y:1997:i:6:p:821-827
    DOI: 10.1080/000368497326741
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    References listed on IDEAS

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    1. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
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    Cited by:

    1. 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.
    2. António Afonso, 2008. "Euler testing Ricardo and Barro in the EU," Economics Bulletin, AccessEcon, vol. 5(16), pages 1-14.
    3. Giovanni Di Bartolomeo & Lorenza Rossi & Massimiliano Tancioni, 2011. "Monetary policy, rule-of-thumb consumers and external habits: a G7 comparison," Applied Economics, Taylor & Francis Journals, vol. 43(21), pages 2721-2738.
    4. repec:ebl:ecbull:v:5:y:2008:i:16:p:1-14 is not listed on IDEAS

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