Fiscal Policy and Private Sector Saving Behavior: Tests of Ricardian Equivalence in Some Developing Economies

IMF Working Papers, July 1, 1987

Source details

Canonical URL

Fiscal Policy and Private Sector Saving Behavior: Tests of Ricardian Equivalence in Some Developing Economies

Other formats

• Markdown version
• Structured JSON version
• Bundle manifest

Bibliographic details

• Published: July 1, 1987
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451970487.001

Summary

• Tax or debt financing of a given rate of government expenditures would, according to the now well-known Ricardian Equivalence proposition, have equivalent effects on aggregate demand.
• Among the reasons for a deviation from the equivalence is the possibility that the government and the private sector have different planning horizons.
• The paper finds no empirical support for differing planning horizons across sectors in a group of 16 developing economies and, therefore, provides empirical evidence for the equivalence hypothesis.

Key findings

• No empirical support was found for differing planning horizons across sectors in a group of 16 developing economies.
• The empirical evidence in the paper supports the Ricardian Equivalence hypothesis for the sample studied.

Subjects and keywords

• Subject: Consumption, Disposable income, Expenditure, National accounts, Private consumption, Public debt
• Keywords: budget constraint, Consumption, consumption decision, consumption function, Disposable income, equivalence hypothesis, equivalence proposition, market discount rates, Private consumption, WP