Ghassan, Hassan B. (): Test de l’équivalence Ricardienne par la Modélisation SVAR. Published in: Revue de l’Institut National de. Emmanuel Thibault, “L’Equivalence Ricardienne dans les Modèles de Croissance avec Accumulation du Capital”, Revue d’Économie Politique, vol. , hypotheses of rational expectations and Ricardian equivalence can not be anticipations rationnelles et de l’equivalence ricardienne n’est pas rejetee par les .

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Ricardian equivalence

Barri Zain Al-abdeen, Preliminary tests have shown that the ricaardienne among the five groups as well as among the subgroups seems to be in both the constant term of the regression and the other coefficients of the model.

Accordingly, formulation of consistent, log-transformed time series for these variables is unfeasible.

When assessing Ricardian equivalence or any of the new classical doctrines, one should bear in mind the conditional character of these theses.

We avoid imposing formal short run and long run constraints, because this may overestimate the compensation rate and bias the estimation of structural multipliers. The public expenditures and private investment: Since there are three groups, two discriminant functions can be calculated.

David Ricardo was the first to propose this possibility in the early nineteenth century; however, he was unconvinced of its empirical relevance. Equivlaence FPE is again calculated for each lag, and the lag length that minimizes the FPE is chosen as the lag order for each selected variable. The specification of the FPE model proceeds equation by equation and a summary description of the procedure is given below1. This page was last edited on 18 Ricrdienneat If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item.

L&#;EQUVALENCE RICARDIENNE by asma Guezguez on Prezi

Corrections All material on this site has been provided by the respective publishers and authors. Therefore, the private and public sectors can be integrated by combining consumer’s and government’s budget constraints. Incorporating expectations Solvent countries High-income 0. The solution of 8 in terms of C provides an approximation to the Euler equation for consumption.

Under these conditions, if governments finance deficits by issuing bonds, the bequests that families grant to their children will equivxlence just large enough to offset the higher taxes that will be needed to ricardiennd off those bonds. In summary, Ricardian and non-Ricardian fonns of consumer behaviour seem equivalenve emerge from the preceding discussion, depending on the state of country indebtedness, but regardless of the level of per capita income.


Thus individuals, further to economizing on tax cuts, proceed to curtail their present consumption expenditure in order to be able to meet the tax liabilities out of the continuously growing stock of debt. Five dummy variables are added to 9 to designate the group each country belongs to.

In recent years, a substantial amount of work has been carried out on the effects of debt-financed tax cuts on consumption. In solvent countries, consumers are shown to operate under a debt-illusion and to behave irrationally, in the sense that they do not carefully monitor developments in the public sector to ensure that the situation will continue to remain economically sound.

Journal of Economic Literature In empirically testing the validity of the traditional view vis-a-vis Ricardian equivalence, researchers rely heavily on the sign and statistical significance of the coefficients on a number of fiscal variables, each of them considered independently: Accordingly, these agents may be claimed to be in a state of debt illusion ; that is, a tax cut coupled with a bond issue will probably stimulate consumer spending, in conformity with the traditional view of ricadrienne policy potency1.

It may be claimed that the arguments of the disutility function debt and taxes are chosen by the government rather ricardiejne by consumers and hence it is the behaviour that is tested However an implicit assertion in the process of integrating pri vate and public sectors is that it is preferences as revealed in the normal poli tical voting process which finally dictate the combination of current and future taxes to be collected by the political party in power Thus forward looking consumers sup posedly have sufficient control over both the level of government outlays and the finan cing means via their voting behaviour In Ricardian setup the meaning of is that position cannot be improved by debt-financed tax ricardienhe which signal increases in future taxes as such increases are discounted for in the process of determining current spending levels Given that the present analysis revolves around the question of the REH acceptability the mar ginal condition may be considered as good working hypothesis.

Ricardian equivalence – Wikipedia

Sorting out the sample countries according to the debt ratio is a prerequisite for assessing the equovalence on private spending of the level of indebtedness. Accordingly, they are disposed to compromise with lower spending levels out of current income — instead of opting for temporary welfare improvements — in an attempt to allocate evenly over time the adverse effects of the heavier future tax burden.


To this end, the above described two-step procedure cluster and discriminant analyses is replicated for the countries belonging to each of the three groups and new discriminant scores are derived, which take on increasing values as per capita income rises.

The relationship between government expenditures and economic growth in Arabia Saudi Kingdom. Estimation of Euler equations for the consumer’s stochastic dynamic optimization problem provided evidence that can be summarized as follows: This happens ricardiennee in cases where:. As Mundlak [] has shown, this estimator amounts to applying ordinary least squares to 9expressed in terms of transformed variables.

The second approach consists in estimating the first-order conditions characterizing the optimal path of consumption for individual agents.

Thus, an attempt is made to restrict the flow of information concerning consumer behaviour from one country to the other. Accordingly, the validity of REH is seriously challenged, while the alternative Keynesian tradition of fiscal policy effectiveness tends to prevail not only in terms of a short-run countercyclical framework, but also in the context of a long-run government planning, which aims at affecting secular rates of growth in demand and output.

During —80, government revenue was The facts about private saving, government saving and consumption in the US are shown in Table 1.

Seater, John J, Journal of Public Administration 43 4 InRobert J. Thus, the relationship to be first considered is. Governments do not have any potential to exert countercyclical efforts if the path of government expenditures is fixed and if agents form rational expectations. Governments can finance their expenditures by creating new money, by, levying taxes, or by issuing bonds.

If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form. Following the classification of the pooled cross-section, time-series sample size of 49 countries into three groups, according to the level of indebtedness, each group need be further segregated into two subgroups, according to the level of per capita income.

The identification of homogeneous groups of countries, through the cluster analysis, opens the way for a three-group discriminant analysis, in order to