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

Author/Editor:

Rina Bhattacharya

Publication Date:

August 1, 1999

Electronic Access:

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Summary:

This paper explores the hypothesis that the propensity to consume out of income is not constant but varies, perhaps in a nonlinear fashion, with fiscal variables. It examines whether there is any empirical evidence to support the hypothesis that households move from non-Ricardian to Ricardian behavior as government debt reaches high levels and as uncertainty about future taxes increases. The paper also examines the possibility of a relationship (along the lines of the Bertola-Drazen model) between the propensity to consume out of income and the government consumption-to-GDP ratio.

Series:

Working Paper No. 1999/112

Subject:

Consumption Expenditure Government consumption Income National accounts Private consumption Public debt

Frequency:

Annually

English

Publication Date:

August 1, 1999

ISBN/ISSN:

9781451853582/1018-5941

Stock No:

WPIEA1121999

Pages:

28

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