Ricardian Equivalence, the Structural Deficit, and the Cyclical Deficit: A Note

Richard Cebula (), Chao-Shun Hung Hung and Neela D. Manage ()
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Chao-Shun Hung Hung: College of Business, Florida Atlantic University, Postal: 777 Glades Road, Boca Raton, FL 33431, USA, http://business.fau.edu/
Neela D. Manage: College of Business, Florida Atlantic University, Postal: 777 Glades Road, Boca Raton, FL 33431, USA, http://business.fau.edu/

Economia Internazionale / International Economics, 1996, vol. 49, issue 1, 19-27

Abstract: This empirical study investigates the Ricardian Equivalence Theorem from the perspective of aggregate personal savings. If the structural deficit is viewed as the expected budget deficit, the results in this study provide empirical support for Ricardian Equivalence behavior. On the other hand, cyclical deficits do not provide support for Ricardian Equivalence. However, in view of the very modest coefficients (closer to zero than to unity) on the structural deficit variable, it appears that Ricardian Equivalent behavior is incomplete and that savings only partially offset the effects of anticipated deficits on the economy.

Date: 1996
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