Deficits and Interest Rates as Evidence of Ricardian Equivalence

David Rose () and David Hakes
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David Hakes: University of Northern Iowa

Eastern Economic Journal, 1995, vol. 21, issue 1, 57-66

Abstract: A number of empirical studies have failed to find a significant relationship between deficits and interest rates. This "non-finding" has become something of a stylized fact among many economists and is often cited as evidence of the validity of the Ricardian equivalence theorem. In this paper we show that estimates of reduced-form interest rate equations do not provide direct information about structural parameters that might reveal Ricardian equivalence. As a result, an insignificant relationship between deficits and interest rates is only a necessary, not a sufficient, condition for Ricardian equivalence.

Keywords: Deficit; Ricardian Equivalence (search for similar items in EconPapers)
JEL-codes: E62 (search for similar items in EconPapers)
Date: 1995
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