Author: Roberto Ricciuti Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
This paper reviews the literature on Ricardian equivalence. This hypothesis may be interpreted as a generalization to the short and the long run of the theories that put no weight on the real effects of public policies on aggregate demand. We argue that Ricardian equivalence relies on both the permanent income hypothesis and the fulfillment of the intertemporal government budget constraint. The theoretical literature emphasizes several reasons for departures from this hypothesis. However, the empirical literature is inconclusive. When Ricardian equivalence is tested in a life-cycle framework the hypothesis is usually rejected, while when the empirical analysis is based on optimizing models, it is usually accepted.
Author: Gerhard Reitschuler Publisher: ISBN: Category : Languages : en Pages :
Book Description
Using a structural model based on dynamic optimizing agents, we empirically test the Ricardian Equivalence Proposition (REP) for eleven New EU-Member States (NMS). We extend the basic model by including the government budget constraint, thus being able to evaluate whether individuals take the evolution of public debt into account. In the basic setting we cannot reject the validity of the REP for four NMS, in the extended model the relevance of the REP changes for six countries, implying that the development of government debt and long-term sustainability of public finances matters with regard to the validity of the REP.
Author: B. Douglas Bernheim Publisher: ISBN: Category : Budget deficits Languages : en Pages : 104
Book Description
In evaluating the existing theory and evidence on Ricardian equivalence, it is essential to distinguish between the short run effects of government borrowing (primarily the potential for stimulating aggregate demand) and the long run effects (primarily the potential for depressing capital accumulation). I argue that the theoretical case for long run neutrality is extremely weak, in that it depends upon improbable assumptions that are either directly or indirectly falsified through empirical observation. In contrast, the approximate validity of short run neutrality depends primarily upon assumptions that have at least an aura of plausibility. Nevertheless, even in this case behavioral evidence weighs heavily against the Ricardian view. Efforts to measure the economic effects of deficits directly through aggregate data confront a number of problems which, taken together, may well be insuperable. It is therefore not at all surprising that this evidence has, by itself, proven inconclusive. Overall, the existing body of theory and evidence establishes a significant likelihood that deficits have large effects on current consumption, and there is good reason to believe that this would drive up interest rates. In addition, I find a complete lack of either evidence or coherent theoretical argument to dispute the view that sustained deficits significantly depress capital accumulation in the long run.
Author: Davide Di Laurea Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
We construct an overlapping-generations experiment to test for some allegedly departures from Ricardian equivalence. In the first treatment the setting is close to the theoretical model, while in the second we allow for liquidity-constrained consumers. Finally, we introduce uncertainty on future income. We can never accept the hypothesis that agents behave in a Ricardian way, with some exceptions in the first treatment. We find clear evidence of departure in the other two settings. Our subjects appear to first decide how much to consume out of their resources, and then, sequentially and residually, to decide how much to bequeath.
Author: International Monetary Fund. Research Dept. Publisher: International Monetary Fund ISBN: 1451956770 Category : Business & Economics Languages : en Pages : 228
Book Description
A central proposition regarding effects of different mechanisms of fi-nancing public expenditures is that, under specific circumstances, it makes no difference to the level of aggregate demand if the government finances its outlays by debt or taxation. This so-called Ricardian equivalence states that, for a given expenditure path, substitution of debt for taxes does not affect private sector wealth and consumption. This paper provides a model illustrating the implications of Ricardian equivalence, surveys the litera-ture, considers effects of relaxing the basic assumptions, provides a frame-work to study implications of various extensions, and critically reviews recent empirical work on Ricardian equivalence.
Author: Richard Hemming Publisher: International Monetary Fund ISBN: Category : Business & Economics Languages : en Pages : 62
Book Description
This paper reviews the theoretical and empirical literature on the effectiveness of fiscal policy. The focus is on the size of fiscal multipliers, and on the possibility that multipliers can turn negative (i.e., that fiscal contractions can be expansionary). The paper concludes that fiscal multipliers are overwhelmingly positive but small. However, there is some evidence of negative fiscal multipliers.
Author: Erdal Gumus Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
The size of government expenditure in an economy grows over time. To finance these expenditures, public incomes must grow as well. Given that tax revenues are not sufficient for such spending and levying, new taxes and/or increasing current tax rates are not politically desirable, the only option left is to borrow. The purpose of this paper is to survey the two most important approaches, "crowding-out hypothesis" and "Ricardian Equivalence proposition", in the literature, and evaluate the economic consequences of public borrowing.
Author: National Research Council Publisher: National Academies Press ISBN: 0309175259 Category : Social Science Languages : en Pages : 287
Book Description
This book brings together in one volume what researchers have learned about workers, employers, and retirees that is important for formulating retirement income policies. As the U.S. population ages, there is increasing uncertainty about the solvency of the Social Security and Medicare systems and the adequacy of private pensions to provide for people's retirement needs. The volume covers such critical behaviors as workers' decisions to retire, people's choices of saving over consumption, and employers' decisions about hiring older workers and providing pension and health care benefits. Also covered are trends in mortality, health status, and health care costs that are key to projecting the likely costs and effects of alternative retirement income security policies and a strategy for combining data and research knowledge into a policy modeling framework.
Author: Roberto Ricciuti
Author: Gerhard Reitschuler
Author: B. Douglas Bernheim
Author: Davide Di Laurea
Author: 
Author: International Monetary Fund. Research Dept.
Author: Richard Hemming
Author: John Cunningham Wood
Author: Erdal Gumus
Author: National Research Council