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Is fiscal policy in the euro area Ricardian?

Nikki Panjer, Leo de Haan () and Jan Jacobs ()
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Nikki Panjer: University of Groningen

Empirica, 2020, vol. 47, issue 2, No 9, 429 pages

Abstract: Abstract We empirically determine whether a Ricardian or a non-Ricardian regime is more plausible for the euro area, following the research strategy of Canzoneri et al. (Am Econ Rev 91:1221–1238, 2001). A Vector AutoRegressive model for the primary government balance and the government debt is estimated for the period 1980q2–2013q4. Our model uses dummy interaction terms to account for the breaks due to the introduction of the Euro Convergence Criteria (ECC) and the start of the global financial crisis, respectively. No evidence is found in favour of either regime for the pre-ECC period. In the post-ECC period, a Ricardian regime is more plausible. Some evidence points in the direction of a non-Ricardian regime for the period after the start of the financial crisis.

Keywords: Fiscal policy; Euro area; Ricardian regime (search for similar items in EconPapers)
JEL-codes: E63 H62 H63 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10663-019-09431-y

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