Euler Testing Ricardo and Barro in the EUs

Antonio Afonso

No 2008/23, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: According to Keynesian economics wisdom, government debt has an effect on the economy since consumers see government debt as net wealth. However, according to the debt neutrality hypothesis of Ricardo (1817), popularised by Barro (1974), such effects 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 and that higher government indebtedness could actually deter private consumption.

Keywords: debt neutrality; private consumption; EU; panel data (search for similar items in EconPapers)
JEL-codes: C23 E21 E62 H63 (search for similar items in EconPapers)
Date: 2008-04
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Journal Article: Euler testing Ricardo and Barro in the EU (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ise:isegwp:wp232008

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