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New Evidence on the Private Saving Offset and Ricardian Equivalence

  • Oliver Röhn

The ability of discretionary fiscal policy to affect economic activity following shocks depends on how private agents react. This paper re-investigates the extent of possible offsetting private saving behaviour to fiscal policy changes. The results suggest that the private saving offset is around 40% on average across countries in both the short and the long term, which is somewhat lower than found in prior research. However, the estimates vary considerably across countries. Disaggregate analyses of the budget components shows that changes in current revenues are almost fully offset, whereas offsets to current spending are on average around one third to one half depending on the sample. There is no offset for public investment, making it the most potent policy tool. Saving offsets are stronger the higher the level of government debt consistent with the expectation that snowballing debt may ultimately lead to higher taxation. They are also stronger the better developed financial markets are, pointing to the importance of liquidity constraints for the effectiveness of policy. Nouveaux éléments concernant l'effet compensatoire de l'épargne privée et l'équivalence ricardienne L’influence des mesures budgétaires discrétionnaires sur l’activité économique après un choc dépend de la réaction des agents économiques privés. Ce document réexamine, à partir de données allant jusqu’à 2008, l’ampleur d’un éventuel comportement compensatoire d’épargne du secteur privé face à l’évolution de la politique budgétaire. Les résultats montrent que l’effet compensatoire de l’épargne privée est de 40 % en moyenne dans les différents pays, soit un peu moins que la proportion découlant des recherches antérieures. Les estimations sont toutefois extrêmement variables d’un pays à l’autre. Une analyse désagrégée des composantes du budget fait apparaître que les variations des recettes courantes sont presque entièrement compensées, alors que pour les dépenses courantes, la compensation n’est qu’en moyenne d’un tiers à la moitié, en fonction de l’échantillon. Il n’y a pas d’effet compensatoire de l’investissement public, qui est donc l’instrument d’action le plus puissant. L’effet compensatoire de l’épargne est d’autant plus marqué que le niveau de la dette publique est plus élevé, ce qui est conforme à l’attente d’un assainissement ultérieur qui alourdira l’impôt. L’effet compensatoire est en outre d’autant plus prononcé que les marchés de capitaux sont plus développés, ce qui témoigne de l’importance des contraintes de liquidité pour l’efficacité des politiques.

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 762.

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Date of creation: 06 May 2010
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Handle: RePEc:oec:ecoaaa:762-en
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