Title: The relationship between public and private saving in Spain: does ricardian equivalence hold?
Abstract: This paper aims to test the validity of the Ricardian proposition for the Spanish economy
from three different approaches: a) by testing its theoretical implications on the stability of
national saving and the relationship between fiscal and current account balances, b) by
carrying a number of tests on different structural consumption equations and, c) by testing
this hypothesis in consumption functions stemming from the Euler equations derived from
a consumer�s maximization problem. Our results lean toward rejection of the Ricardian
proposition, although some degree of substitution between public and private saving is
detected. In terms of policy implications, these results would suggest that there is some
room for fiscal policy to exert its countercyclical role in the case of Spain. However, the
effectiveness of such a policy might be limited in a context of rising debt ratios that trigger
sustainability concerns and make consumers increasingly Ricardian.
Publication Year: 2010
Publication Date: 2010-01-01
Language: en
Type: article
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Cited By Count: 1
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