## Private Sector Consumption Behavior and Non-Keynesian Effects of Fiscal Policy

_IMF Working Papers, August 1, 1999_

## Source details

**Canonical URL:** [Private Sector Consumption Behavior and Non-Keynesian Effects of Fiscal Policy](https://www.imf.org/en/publications/wp/issues/2016/12/30/private-sector-consumption-behavior-and-non-keynesian-effects-of-fiscal-policy-3253)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/30/private-sector-consumption-behavior-and-non-keynesian-effects-of-fiscal-policy-3253/index.md)
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## Bibliographic details
- Authors: Rina Bhattacharya
- Published: August 1, 1999
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451853582.001

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### Overview
- Examines the hypothesis that the propensity to consume out of income is not constant but varies, perhaps in a nonlinear fashion, with fiscal variables.
- Investigates whether households move from non-Ricardian to Ricardian behavior as government debt reaches high levels and as uncertainty about future taxes increases.
- Explores a possible relationship, along the lines of the Bertola-Drazen model, between the propensity to consume out of income and the government consumption-to-GDP ratio.

### Research questions and hypotheses
- Does the propensity to consume out of income vary with fiscal variables?
- Is there empirical evidence that households transition from non-Ricardian to Ricardian behavior when:
  - government debt reaches high levels, and/or
  - uncertainty about future taxes increases?
- Is there a relationship between the propensity to consume out of income and the government consumption-to-GDP ratio consistent with the Bertola-Drazen model?

### Methods (as described)
- Uses empirical analysis and panel data estimation technique (keyword listed: panel data estimation technique).
- Focuses on consumption behavior relative to fiscal variables such as government debt and government consumption-to-GDP ratio.

### Key findings (summary of the paper’s investigative focus)
- The paper explores nonlinear variation in the propensity to consume out of income in response to fiscal variables.
- Investigates potential behavioral shift from non-Ricardian to Ricardian household behavior associated with high government debt and increased tax uncertainty.
- Examines the possibility of a relationship between propensity to consume out of income and the government consumption-to-GDP ratio in line with the Bertola-Drazen model.

### Subject areas and keywords
- Subject: Consumption, Expenditure, Government consumption, Income, National accounts, Private consumption, Public debt
- Keywords: debt stabilization programme, fiscal policy, GDP ratio, government, government consumption, government debt, household income, Income, non-Keynesian effects, panel data estimation technique, Private consumption, Ricardian behavior, WP

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## Content in this bundle

- **Private Sector Consumption Behavior and Non-Keynesian Effects of Fiscal Policy - WP/99/112**
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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/private-sector-consumption-behavior-and-non-keynesian-effects-of-fiscal-policy-3253_