 The Ricardian equivalence hypothesis: evidence from BangladeshNo 2002-6, Economics Discussion Papers from School of Economics, Kingston University London Abstract: This paper examines the Ricardian equivalence hypothesis (REH) and its sources of failure in the case of Bangladesh using various theoretical specifications, annual data from 1974-2001 and linear and non-linear time series techniques. The general findings tend to invalidate the REH: a finite time horizon and the presence of liquidity-constrained individuals are the sources of deviation from the REH. Empirical results reveal that real per capita private consumption (C) under various specifications is cointegrated generally at the 5% level with real per capita income (Y), government expenditure before and after interest rate repayments (G & G2), taxes (T) and the interest rate (r). Results reveal that an increase in G, G2, T and r reduces C and that that an increase in budget deficits raises trade deficits. These results highlight the importance of fiscal policies in boosting private consumption and controlling trade deficits, which are th e prime goals of stabilisation policies being followed by Bangladesh. Keywords: Ricardian Equivalence; Bangladesh; Cointegration analysis; Rational Expectations (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ris:kngedp:2002_006 Access Statistics for this paper More papers in Economics Discussion Papers from School of Economics, Kingston University London Kingston University London, School of Economics, Penrhyn Road, Kingston upon Thames, Surrey, KT1 2EE, UK. Contact information at EDIRC. |
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