Testing Ricardian Neutrality with an Intertemporal Stochastic Model

Leonardo Leiderman and Assaf Razin

No 2258, NBER Working Papers from National Bureau of Economic Research, Inc

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.

Date: 1987-05
Note: ITI IFM
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Citations: View citations in EconPapers (5)

Published as Journal of Money, Credit and Banking, Vol. 20, No. 1, (February 2000).
Published as Financial Crises in Emerging Markets, Glick, Reuven, Ramon Moreno and Mark Speigel, eds., Cambridge: Cambridge University Press, 2000, chapter 8.

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Related works:
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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