Author(s):
Afonso, António 
Date: 2001
Persistent ID: http://hdl.handle.net/10400.5/2749
Origin: Repositório da UTL
Subject(s): Deficit finance; Ricardian equivalence; Private consumption; European Union; panel data
Document details
Government indebtedness and european consumers behaviour
Description
According to conventional macroeconomics, public debt has a significant effect on the economy since consumers see public debt as net wealth, however, according to the Ricardian Equivalence hypothesis, that effect would be absent. This paper's results, obtained from Euler equation estimations, using a panel data approach, indicate that it would be wise to reject the debt neutrality hypothesis for the EU-15. However, estimations carried out after dividing the countries into two groups, tentatively allow us to conclude that private consumption in "less indebted" countries seems to be more responsive to wealth increases than in the "more indebted" countries.
According to conventional macroeconomics, public debt has a significant effect on the economy since consumers see public debt as net wealth, however, according to the Ricardian Equivalence hypothesis, that effect would be absent. This paper's results, obtained from Euler equation estimations, using a panel data approach, indicate that it would be wise to reject the debt neutrality hypothesis for the EU-15. However, estimations carried out after dividing the countries into two groups, tentatively allow us to conclude that private consumption in "less indebted" countries seems to be more responsive to wealth increases than in the "more indebted" countries.
Document Type
Other
Language English
Language English
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