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Crowding-Out Hypothesis versus Ricardian Equivalence Proposition: Evidence from Literature

  • Gumus, Erdal

The size of government expenditure in an economy grows over time. To finance these expenditures, public incomes must grow as well. Given that tax revenues are not sufficient for such spending and levying, new taxes and/or increasing current tax rates are not politically desirable, the only option left is to borrow. The purpose of this paper is to survey the two most important approaches, "crowding-out hypothesis" and "Ricardian Equivalence proposition", in the literature, and evaluate the economic consequences of public borrowing.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42141.

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Date of creation: 2003
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Publication status: Published in Eski┼čehir Osmangazi University Journal of Social Sciences 2.4(2003): pp. 21-35
Handle: RePEc:pra:mprapa:42141
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  1. Makin, John H, 1983. "Real Interest, Money Surprises, Anticipated Inflation and Fiscal Deficits," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 374-84, August.
  2. Seater, John J, 1993. "Ricardian Equivalence," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 142-90, March.
  3. Dwyer, Gerald P, Jr, 1982. "Inflation and Government Deficits," Economic Inquiry, Western Economic Association International, vol. 20(3), pages 315-29, July.
  4. Bradley, Michael D., 1986. "Government spending or deficit financing: which causes crowding out?," Journal of Economics and Business, Elsevier, vol. 38(3), pages 203-214, August.
  5. Buchanan, James M, 1976. "Barro on the Ricardian Equivalence Theorem," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 337-42, April.
  6. Plosser, Charles I., 1982. "Government financing decisions and asset returns," Journal of Monetary Economics, Elsevier, vol. 9(3), pages 325-352.
  7. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  8. Nadeem U. Haque, 1988. "Fiscal Policy and Private Sector Saving Behavior in Developing Economies," IMF Staff Papers, Palgrave Macmillan, vol. 35(2), pages 316-335, June.
  9. Haug, Alfred A, 1990. "Ricardian Equivalence, Rational Expectations, and the Permanent Income Hypothesis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(3), pages 305-26, August.
  10. Mark Wheeler, 1999. "The macroeconomic impacts of government debt: An empirical analysis of the 1980s and 1990s," Atlantic Economic Journal, International Atlantic Economic Society, vol. 27(3), pages 273-284, September.
  11. Roberto Ricciuti, 2003. "Assessing Ricardian Equivalence," Journal of Economic Surveys, Wiley Blackwell, vol. 17(1), pages 55-78, February.
  12. Weintraub, Robert E., 1978. "Congressional supervision of monetary policy," Journal of Monetary Economics, Elsevier, vol. 4(2), pages 341-362, April.
  13. Evans, Paul, 1988. "Are Consumers Ricardian? Evidence for the United States," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 983-1004, October.
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