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Are Pakistani Consumers Ricardian?

  • Waqas, Muhammad
  • Awan, Masood Sarwar

The purpose of this study is to check the Ricardian Equivalence Hypothesis in case of Pakistan by using annual data for the period of 1973-2009. Government expenditure, private consumption expenditure, tax revenue, government debt, disposable income, government budget deficit and wealth are the variables which are used for analysis. Cointegration results show a long run relationship among the variables. Results of structural form consumption function invalidate the Ricardian Equivalence Hypothesis in case of Pakistan. These results draw attention towards the significance of fiscal policies in boosting private consumption and controlling budget deficits, which are the prime goals of stabilization policies in Pakistan.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35375.

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Date of creation: 2011
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Publication status: Published in Economics and Business Review 2011.13(2011): pp. 161-177
Handle: RePEc:pra:mprapa:35375
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  1. 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.
  2. Siddiki, Jalal Uddin, 2002. "The Ricardian equivalence hypothesis: evidence from Bangladesh," Economics Discussion Papers 2002-6, School of Economics, Kingston University London.
  3. repec:ebl:ecbull:v:5:y:2004:i:16:p:1-10 is not listed on IDEAS
  4. Khalid, Ahmed M., 1996. "Ricardian equivalence: Empirical evidence from developing economies," Journal of Development Economics, Elsevier, vol. 51(2), pages 413-432, December.
  5. Seater, John J, 1993. "Ricardian Equivalence," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 142-90, March.
  6. Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
  7. Roberto Ricciuti & Davide Di Laurea, 2003. "An experimental analysis of two departures from Ricardian equivalence," Economics Bulletin, AccessEcon, vol. 8(11), pages 1-11.
  8. Seater, John J. & Mariano, Roberto S., 1985. "New tests of the life cycle and tax discounting hypotheses," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 195-215, March.
  9. Cardia, Emanuela, 1997. "Replicating Ricardian Equivalence Tests with Simulated Series," American Economic Review, American Economic Association, vol. 87(1), pages 65-79, March.
  10. Hannes Kaadu & Lenno Uusküla, 2004. "Liquidity Constrains and Ricardian Equivalence in Estonia," Bank of Estonia Working Papers 2004-7, Bank of Estonia, revised 10 Oct 2004.
  11. Gerhard Reitschuler & Jesús Crespo Cuaresma, 2004. "Ricardian Equivalence Revisited: Evidence from OECD countries," Economics Bulletin, AccessEcon, vol. 5(16), pages 1-10.
  12. 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.
  13. 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.
  14. repec:ebl:ecbull:v:8:y:2003:i:11:p:1-11 is not listed on IDEAS
  15. 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.
  16. Carlos Fonseca Marinheiro, 2001. "Ricardian Equivalence: an Empirical Application to the Portugese Economy," Center for Economic Studies - Discussion papers ces0112, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  17. 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.
  18. Jesus Crespo Cuaresma & Gerhard Reitschuler, 2007. "Is the Ricardian Equivalence Proposition an 'Aerie Fairy' Theory for Europe?," Economica, London School of Economics and Political Science, vol. 74(296), pages 682-694, November.
  19. Agustín García & Julián Ramajo, 2005. "Fiscal policy and private consumption behaviour: The Spanish case," Empirical Economics, Springer, vol. 30(1), pages 115-135, January.
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