Testing Ricardian Neutrality with an Intertemporal Stochastic Model

Leonardo Leiderman and Assaf Razin

No 275425, Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research

Abstract: The purpose of this paper is to develop and estimate a stochastic-intertemporal model of consumption behavior and to use it for testing a version of the Ricardian-equivalence proposition with time series data. Two channels that may give rise to deviations from this proposition are specified: Finite horizons and liquidity constraints. In addition, the model incorporates explicitly the roles of taxes, substitution between public and private consumption, and different degrees of consumer goods' durability The evidence, based on data for Israel in the first half of the 1980s supports the Ricardian neutrality specification, yielding plausible estimates for the behavioral parameters of the aggregate consumption function.

Keywords: Financial Economics; Research Methods/ Statistical Methods (search for similar items in EconPapers)
Pages: 38
Date: 1987-01
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Citations: View citations in EconPapers (4)

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Journal Article: Testing Ricardian Neutrality with an Intertemporal Stochastic Model (1988)
Working Paper: Testing Ricardian Neutrality with an Intertemporal Stochastic Model (1987)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:isfiwp:275425

DOI: 10.22004/ag.econ.275425

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