THE IMPACT OF GOVERNMENT DEFICITS ON PERSONAL AND NATIONAL SAVING RATES

Michael Darby (), Robert Gillingham and John S. Greenlees

Contemporary Economic Policy, 1991, vol. 9, issue 4, pages 39-55

Abstract: This study provides fresh evidence on the responsiveness of private consumption and, by implication, saving to government deficits. It focuses on consumption and saving from 1981 to 1989, a period during which the personal saving rate was characterized as surprisingly unresponsive to high federal budget deficits. The authors attempt to determine whether this experience is consistent with previous behavior. They also test whether this experience refutes the Ricardian Equivalence Proposition (REP), under which consumers incorporate the government's intertemporal budget constraint into their own. Copyright 1991 Western Economic Association International.

Date: 1991
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