Liquidity Constrains and Ricardian Equivalence in Estonia
This paper aims to find evidence of the influence of government deficit on private consumption in Estonia. The data only shows some support for Ricardian equivalence. Two approaches were used in the empirical tests. The Haque and Montiel (1989) equation of consumption was estimated using an instrumental variables technique. The Aschauer (1985) system of equations was estimated with the full information maximum likelihood method. Formal tests based on macro data could neither reject nor confirm the existence of liquidity constraints or Ricardian equivalence. There remains a lot of room for testing both of these hypotheses in Estonia. Further efforts to test liquidity constraints should concentrate on using micro data.
|Date of creation:||10 Oct 2004|
|Date of revision:||10 Oct 2004|
|Contact details of provider:|| Postal: |
Web page: http://www.bankofestonia.info
More information through EDIRC
|Order Information:|| Postal: Estonia bld. 13, 15095 Tallinn, ESTONIA|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barro, Robert J., 1974.
"Are Government Bonds Net Wealth?,"
3451399, Harvard University Department of Economics.
- Stock, James H. & West, Kenneth D., 1988.
"Integrated regressors and tests of the permanent-income hypothesis,"
Journal of Monetary Economics,
Elsevier, vol. 21(1), pages 85-95, January.
- James H. Stock & Kenneth D. West, 1988. "Integrated Regressors and Tests of the Permanent Income Hypothesis," NBER Working Papers 2359, National Bureau of Economic Research, Inc.
- Haug, Alfred A, 1996. "Blanchard's Model of Consumption: An Empirical Study," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(2), pages 169-77, April.
- Reginald Darius, 2001. "Debt neutrality: theory and evidence from developing countries," Applied Economics, Taylor & Francis Journals, vol. 33(1), pages 49-58.
- Fumio Hayashi, 1982.
"The Effect of Liquidity Constraints on Consumption: A Cross-Sectional Analysis,"
NBER Working Papers
0882, National Bureau of Economic Research, Inc.
- Hayashi, Fumio, 1985. "The Effect of Liquidity Constraints on Consumption: A Cross-sectional Analysis," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 183-206, February.
- Fumio Hayashi, 1982. "The Effect of Liquidity Constraints on Consumption: Cross-Sectional Analysis," Discussion Papers 516, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Christopher D. Carroll, 2001.
"A Theory of the Consumption Function, With and Without Liquidity Constraints (Expanded Version),"
NBER Working Papers
8387, National Bureau of Economic Research, Inc.
- Christopher D. Carroll, 2001. "A Theory of the Consumption Function, with and without Liquidity Constraints," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 23-45, Summer.
- Christopher D. Carroll, 2001. "Codes for A Theory of the Consumption Function, With and Without Liquidity Constraints," QM&RBC Codes 37, Quantitative Macroeconomics & Real Business Cycles.
- Aschauer, David Alan, 1985. "Fiscal Policy and Aggregate Demand," American Economic Review, American Economic Association, vol. 75(1), pages 117-27, March.
- Agustín García & Julián Ramajo, 2005. "Fiscal policy and private consumption behaviour: The Spanish case," Empirical Economics, Springer, vol. 30(1), pages 115-135, January.
- Seater, John J, 1993. "Ricardian Equivalence," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 142-90, March.
- Leonardo Leiderman & Assaf Razin, 1987.
"Testing Ricardian Neutrality with an Intertemporal Stochastic Model,"
NBER Working Papers
2258, National Bureau of Economic Research, Inc.
- 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.
- Fumio Hayashi, 1985. "Tests for Liquidity Constraints: A Critical Survey," NBER Working Papers 1720, National Bureau of Economic Research, Inc.
- Robert J. Barro, 1996. "Reflections on Ricardian Equivalence," NBER Working Papers 5502, National Bureau of Economic Research, Inc.
- Becker, Torbjörn, 1995. "Government Debt and Private Consumption: Theory and Evidence," SSE/EFI Working Paper Series in Economics and Finance 71, Stockholm School of Economics.
- Haque, Nadeem U & Montiel, Peter, 1989. "Consumption in Developing Countries: Tests for Liquidity Constraintsand Finite Horizons," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 408-15, August.
- Evans, Paul, 1993. "Consumers Are Not Ricardian: Evidence from Nineteen Countries," Economic Inquiry, Western Economic Association International, vol. 31(4), pages 534-48, October.
- 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.
- Rasmus Pikkani, 2000. "The monetary sector under a currency board arrangement : specification and estimation of a model with Estonian data," Bank of Estonia Working Papers 2000-4, Bank of Estonia, revised 13 Oct 2000.
- Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
When requesting a correction, please mention this item's handle: RePEc:eea:boewps:wp2004-07. 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: (Peeter Luikmel)
If references are entirely missing, you can add them using this form.