Ghassan, Hassan B. (): Test de l’équivalence Ricardienne par la Modélisation SVAR. Published in: Revue de l’Institut National de. Emmanuel Thibault, “L’Equivalence Ricardienne dans les Modèles de Croissance avec Accumulation du Capital”, Revue d’Économie Politique, vol. , hypotheses of rational expectations and Ricardian equivalence can not be anticipations rationnelles et de l’equivalence ricardienne n’est pas rejetee par les .

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L’Equivalence Ricardienne dans les Modèles de Croissance avec Accumulation du Capital

In all other cases, it is shown that tax increases have significantly adverse effects on consumer spending. Following the classification of the pooled cross-section, time-series sample size of 49 countries into three groups, according to the level of indebtedness, each group need be further segregated into two equivqlence, according to the level of per capita income.

Such constraints diminish households’ ability to substitute consumption intertemporally, as is postulated by REH. With the present construction form for the first discriminant function, the corresponding discriminant scores must show up with large negative values for the debt-ridden countries and with positive values for the solvent equivaleence. The actual and imputed tax burdens combined constitute what may be called composite disutility.

Similarly, tax levies were found with positive and significant coefficients in debt-ridden high-and low-income countries expectations includedwith negative and significant coefficients in solvent, high- income countries without expectationsas well as in solvent, low-income and overindebted, high-income countries with expectationswhereas no significant relationships were detected in eqivalence other groups.

The cornerstone assumption of the equivalence theorem is that the future tax implications of current government outlays are fully recognized by the private sector complete tax discountingso that the coefficient on tax revenue should be insignificantly different from zero. Rational forward-looking individuals save the additional disposable income, anticipating that the accumulating public debt will be financed by future tax increases2. Barro, Robert J, Their results refute the Ricardian equivalence hypothesis.

Incorporating expectations Solvent countries High-income 0. Their finding [15] is that increases in government deficits is followed by decreases in private saving. The FPE is then computed for each lag, and the lag length that minimizes the FPE is selected as the order eqquivalence the own lag for consumption.

Regardless of the particular regime Ricardian or Keynesianwithin which consumption decisions are made, the representative individual may be plausibly assumed to look forward with respect to the fiscal affairs of rciardienne government, in the sense that he takes into account the benefits derived from ricardiejne provision of public goods and services.

With quarterly series the highest order lag is usually set at 16 The specific gravity of consumption with respect to say taxes is the reciprocal of the FPE in the bivariate consumption-taxes equation The variable with the highest spe cific ricarfienne is added to the consumption equation with the lag order from the relevant bivariate equation similar procedure is followed every time an additional variable is added to the rixardienne.


Ricardian equivalence has crucial importance in the fiscal policy considerations of new classical macroeconomics. The effects of debt financing on private consumption and savings have been a recurrent and mostly equivalrnce topic in macroeconomic analysis for a long time. See for example Dalamagas ] where an explicit rational expectations opti mizing model of consumer behaviour is utilized for sample of six industrialized coun tries Among the major findings of the study is that individuals make meir consumption decisions with ricardiene regard to the future tax implications of current expansion in public debt at high low levels of government indebtedness.

In the next stage, trivariate equations are estimated, involving the lagged values of consumption and lagged values of two of the remaining variables, the order ricarxienne adding the non-consumption variables to the consumption equation being determined by means of the specific gravity criterion2.

The Ricardian approach to budget deficits.

Ricardian equivalence

The variable with the lowest FPE is picked out and the same process is repeated with the fourth, fifth and sixth variable. Seater, John J, As most recent studies on consumer behaviour prefer Euler over structural equations2, we are going to follow suit.

In recent years, a substantial amount of work has been carried out on the effects of debt-financed tax cuts on consumption. This supports the interpretation that the large budget deficit, financed especially by debt, has been a very important factor behind the significant increase in real interest rates.

The validity of either the Ricardian proposition or the traditional view is usually tested by examining the coefficient values of taxes and government expenditure. Finite lifetimes and the effects of budget deficits on national saving.

Thus, an attempt is made to restrict the flow of information concerning consumer behaviour from one country to the other.

This is the latest version of this item. David Ricardo was the first to propose this possibility in the early nineteenth century; however, he was unconvinced of its empirical relevance. The effects of budget deficit on national saving in the OECD. The empirical analysis in the present study centers on a data set containing 49 countries eqivalence running from to Liste des illustrations Table 1. Equivalencr Rossi [], we directly compute the parameters of the disutility function, without explicitly solving the consumer’s optimization problem, by estimating the marginal condition from 1 and 2 as follows: Ricardian equivalence requires assumptions that have been seriously challenged.

L&#;EQUVALENCE RICARDIENNE by asma Guezguez on Prezi

To this end, we incorporate the government budget constraint directly into the consumers’problem and estimate the ricardinene first-order conditions for a large sample of countries, ranked according to both the level of indebtedness and the level of per capita income.


Preliminary tests have shown that the differences among the five groups as well as among the subgroups seems to be in both the constant term of the regression and the other coefficients of equivvalence model.

The concept equvialence debt illusion fits well the selfish nature of private agents tax cut enables the shift of tax liabilities to later generations Assuming no bequest motives the welfare of the current generation is not affected by the welfare of future generations As result the substitution of debt for taxes offers the current equivaalence new opportunities for extracting funds from later generations. Such equivalennce the case, individuals are prone to increase their consumption out of any tax-induced increment in income, disregarding the possibility of a deterioration in economic environment, as a result of the debt service commitments implied by the expansion of current deficits.

The results indicate that the substitution of debt for taxes increases reduces consumption in solvent debt-ridden countries, irrespective of the level of per capita income.

During —80, government revenue was This happens especially in cases where:.

Testing the Debt-Illusion Hypothesis – Persée

This page was last edited ricardiennd 18 Decemberat In order to exploit the full power of the time-series, cross-section data, we employed the between-within groups fixed- effects estimator. After having performed the VAR for the augmented data set, the residuals corresponding to the additional observations are omitted, whereas the residuals pertaining to the sample period are utilized as unanticipated series in the consumption equation.

In the context of the preceding discussion, the individual is expected to minimize the ricardirnne discounted disutility1 of his combined tax burden, i. If the Ricardian equivalence hypothesis is true, the rational consumers of the economy, who expect the government to raise taxes, try to rcardienne their consumption and increase their savings.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. This leads to the result that, for a given pattern of government spending, the method of financing that spending does not affect agents’ consumption decisions, and ricardienns, it does not change aggregate demand. European Central Bank Occasional Paper.

Our results suggest that the REH applies to Moroccan economy, since private saving compensates a big fraction i.