Government indebtedness and european consumers behaviour

Antonio Afonso

No 2001/12, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: 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.

Keywords: Deficit finance; Ricardian equivalence; Private consumption; European Union; panel data. (search for similar items in EconPapers)
JEL-codes: C23 E21 E62 H63 (search for similar items in EconPapers)
Date: 2001
New Economics Papers: this item is included in nep-eec and nep-pbe
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ise:isegwp:wp122001

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More papers in Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa Department of Economics, ISEG - Lisbon School of Economics and Management, Universidade de Lisboa, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL.
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