Consumption and Government-Budget Finance in a High-Deficit Economy

Leonardo Leiderman and Assaf Razin

No 2032, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper characterizes empirically how government budget variables, such as spending, taxes, and deficits, affected private-sector consumption in the high-budget-deficit economy of Israel during the first half of the 1980s. The paper develops and estimates an intertemporal optimizing model of consumption choice by finite-lived individuals. The evidence supports this formulation against the Ricardian infinite-horizon case, but it does not support it when compared to the unrestricted relations in the data.

Date: 1986-09
Note: ITI IFM
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