Does Ricardian Equivalence Hold When Expectations Are Not Rational?

George Evans, Seppo Honkapohja and Kaushik Mitra

Journal of Money, Credit and Banking, 2012, vol. 44, issue 7, 1259-1283

Abstract: This paper considers the Ricardian Equivalence proposition when expectations are not rational and are instead formed using adaptive learning rules. We show that Ricardian Equivalence continues to hold provided suitable additional conditions on learning dynamics are satisfied. However, new cases of failure can also emerge under learning. In particular, for Ricardian Equivalence to obtain, agents’ expectations must not depend on government’s financial variables under deficit financing.

Date: 2012
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https://doi.org/10.1111/j.1538-4616.2012.00531.x

Related works:
Journal Article: Does Ricardian Equivalence Hold When Expectations Are Not Rational? (2012)
Working Paper: Does Ricardian Equivalence Hold When Expectations are not Rational? (2010)
Working Paper: Does Ricardian Equivalence Hold When Expectations are not Rational? (2010)
Working Paper: Does Ricardian Equivalence Hold When Expectations are not Rational? (2010)
Working Paper: Does Ricardian Equivalence hold when expectations are not rational? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:44:y:2012:i:7:p:1259-1283

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