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Private Sector Consumption Behavior and Non-Keynesian Effects of Fiscal Policy

  • Rina Bhattacharya
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    This paper explores the hypothesis that the propensity to consume out of income is not constant but varies, perhaps in a nonlinear fashion, with fiscal variables. It examines whether there is any empirical evidence to support the hypothesis that households move from non-Ricardian to Ricardian behavior as government debt reaches high levels and as uncertainty about future taxes increases. The paper also examines the possibility of a relationship (along the lines of the Bertola-Drazen model) between the propensity to consume out of income and the government consumption-to-GDP ratio.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 99/112.

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    Length: 28
    Date of creation: 01 Aug 1999
    Date of revision:
    Handle: RePEc:imf:imfwpa:99/112
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