Fiscal Policy and Private Sector Saving Behavior: Tests of Ricardian Equivalence in Some Developing Economies

International Monetary Fund

No 1987/051, IMF Working Papers from International Monetary Fund

Abstract: Tax or debt financing of a given rate of government expenditures would, according to the now well-known Ricardian Equivalence proposition, have equivalent effects on aggregate demand. Among the reasons for a deviation from the equivalence is the possibility that the government and the private sector have different planning horizons. The paper finds no empirical support for differing planning horizons across sectors in a group of 16 developing economies and, therefore, provides empirical evidence for the equivalence hypothesis.

Keywords: WP; consumption function; equivalence proposition; consumption decision; budget constraint; market discount rates; equivalence hypothesis; Consumption; Disposable income; Private consumption (search for similar items in EconPapers)
Pages: 24
Date: 1987-07-01
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Citations: View citations in EconPapers (2)

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