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Are Pakistani Consumers Ricardian?

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  • Waqas, Muhammad
  • Awan, Masood Sarwar

Abstract

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.

Suggested Citation

  • Waqas, Muhammad & Awan, Masood Sarwar, 2011. "Are Pakistani Consumers Ricardian?," MPRA Paper 35375, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:35375
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    File URL: https://mpra.ub.uni-muenchen.de/35375/1/MPRA_paper_35375.pdf
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    References listed on IDEAS

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    1. Carlos Fonseca Marinheiro, "undated". "Ricardian Equivalence: An Empirical Application to the Portuguese Economy," International Economics Working Papers Series ces0112, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, International Economics.
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    3. 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.
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    6. Seater, John J, 1993. "Ricardian Equivalence," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 142-190, March.
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    8. Khalid, Ahmed M., 1996. "Ricardian equivalence: Empirical evidence from developing economies," Journal of Development Economics, Elsevier, vol. 51(2), pages 413-432, December.
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    Keywords

    Fiscal policy; Ricardian Equivalence; Government debt; Pakistan;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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